Money chat with Pete Eldridge
Pete Eldridge works as an advisor for CAB as well as askTheSite. We welcomed him back to answer your money questions.
Jo7: OK, so let's get started.
ShyBoy: I have managed to put together a strict budget with the aim of getting back in the black by April next year. What's the best way to budget your money long term if you aren't sure whether your income will go down or even stop altogether?
With the economy so unstable, people could lose their jobs or their overtime or access to credit, which might mean their financial situation gets really tight.
Pete: Hiya. It's very much a case of trying to make sure that you only spend what you absolutely need to. If you think you're going to lose your job then the most important thing to do is to try and keep your commitments as limited as possible.
My gran used to have little pots that she used to save for different things, like rent and gas. This sounds old fashioned, but it's something we're going to need to do. Keep money in different places and keep essentials in mind like utility bills, council tax and TV licence.
Then you need to make sure you've got enough to cover travel and food, but luxuries like going out will have to come last. Keep money for the essentials and put any extra money aside for a rainy day.
When you have got some money put aside you'll need to think about putting it in to something like an ISA account, or in to savings or bonds further down the line. This way you can gain interest on your savings and your money will grow.
Bitty: I can't find any work at the moment and I was thinking of going on Jobseeker's Allowance. I was wondering, can I claim at another town's Job Centre from my home address? For example, I live near Slough, can I claim at Reading or Maidenhead?
Pete: These days you don't need to claim benefits at a particular office. You'll need to telephone the National Benefit Claim Line to make the claim and they will then tell you which office will be best for you to claim from. The number to call is 0800 055 6688.
blah blah blah: My fella has suggested that we buy a house together in the next year or two, thing is, he already owns a house and has paid about £50K of it off. How do mortgages work if one party already has a house? Would the £50K be transferred to his new mortgage?
Pete: If your chap sells his current house the amount he will get for it will go towards his current mortgage. If there's any extra money (equity) then that can go towards a new house, but it doesn't have to. There is also the option of a portable mortgage; it may be worth looking in to whether this is possible with his current plan.
blah blah blah: How much do mortgage lenders lend? Does it matter if you have debts on credit cards and stuff?
Pete: At the moment, banks and building societies are being really careful about who they lend to. Generally they've tended to lend two or three times your income. If you have a credit history where you haven't borrowed too much, then providing you have an income that can support your repayments and the mortgage lender thinks you'll be able to sustain your repayments on the mortgage, then you're in with a chance.
Bear in mind though that most mortgage lenders are looking for a fairly hefty deposit, somewhere between 10%-25% of the value. It's worth checking out comparison websites to see what mortgages are on offer. Remember not to over-stretch yourself. If you borrow money and then your income drops, you could lose your house and everything you've put into it.
"I get a lot of questions from people where they've borrowed from friends and family and things haven't gone to plan."
In the early stages, it can cost £3-5K for things like legal fees and estate agent fees. Many experts these days actually say you're better off renting than buying.
Apple: I'm considering a graduate loan to help out with money as I start a new job this week and won't get paid for ages. My partner has offered to lend me the money instead, is this really a good idea?
Pete: A lot will depend on how steady your relationship is and how far you're willing to make it a formal loan. I get lots of questions from people where they've borrowed from friends and family and things haven't gone to plan.
If this happens then a whole range of problems can come from it, especially from the person who has lent the money as they could end up going to court to sort it out.
Overall, it's not something I'd recommend as it's safer to go for a graduate loan. However, if you do feel your relationship is strong, it's good to draw up a formal agreement stating how much will be paid back and how often. This will be a good way of showing your partner how responsible you're being and that you're happy to have it all down on paper in case anything does go wrong in the future.
Apple: Can I just write it myself or does it need to be done with legal help?
Pete: It doesn't need to be done with legal help; so long as you draw it up fairly carefully. You'll both need to sign it and get someone to witness it. This can be done by a friend each to witness it from both sides; it does not need to be a solicitor.
Apple: That's helpful, thanks :)
Pete: Finally though, do avoid making any lending seem like a gift.
Apple: How do you mean?
Pete: If things did go wrong the main defence that you could make would be: "I thought it was a gift so I don't have to pay it back". If there's nothing on paper to say differently then there wouldn't be protection for your partner.
I'm not saying you would do such a thing, just giving the general advice for anyone who might be considering a similar loan.
Pete: OK guys, thanks for your questions.
Jo7: Thanks Pete and thanks for some great questions everyone.
Money chat with Pete Eldridge
Pete Eldridge works as an advisor for CAB as well as askTheSite. We welcomed him back to answer your money questions.
Jo7: OK, so let's get started.
ShyBoy: I have managed to put together a strict budget with the aim of getting back in the black by April next year. What's the best way to budget your money long term if you aren't sure whether your income will go down or even stop altogether?
With the economy so unstable, people could lose their jobs or their overtime or access to credit, which might mean their financial situation gets really tight.
Pete: Hiya. It's very much a case of trying to make sure that you only spend what you absolutely need to. If you think you're going to lose your job then the most important thing to do is to try and keep your commitments as limited as possible.
My gran used to have little pots that she used to save for different things, like rent and gas. This sounds old fashioned, but it's something we're going to need to do. Keep money in different places and keep essentials in mind like utility bills, council tax and TV licence.
Then you need to make sure you've got enough to cover travel and food, but luxuries like going out will have to come last. Keep money for the essentials and put any extra money aside for a rainy day.
When you have got some money put aside you'll need to think about putting it in to something like an ISA account, or in to savings or bonds further down the line. This way you can gain interest on your savings and your money will grow.
Bitty: I can't find any work at the moment and I was thinking of going on Jobseeker's Allowance. I was wondering, can I claim at another town's Job Centre from my home address? For example, I live near Slough, can I claim at Reading or Maidenhead?
Pete: These days you don't need to claim benefits at a particular office. You'll need to telephone the National Benefit Claim Line to make the claim and they will then tell you which office will be best for you to claim from. The number to call is 0800 055 6688.
blah blah blah: My fella has suggested that we buy a house together in the next year or two, thing is, he already owns a house and has paid about £50K of it off. How do mortgages work if one party already has a house? Would the £50K be transferred to his new mortgage?
Pete: If your chap sells his current house the amount he will get for it will go towards his current mortgage. If there's any extra money (equity) then that can go towards a new house, but it doesn't have to. There is also the option of a portable mortgage; it may be worth looking in to whether this is possible with his current plan.
blah blah blah: How much do mortgage lenders lend? Does it matter if you have debts on credit cards and stuff?
Pete: At the moment, banks and building societies are being really careful about who they lend to. Generally they've tended to lend two or three times your income. If you have a credit history where you haven't borrowed too much, then providing you have an income that can support your repayments and the mortgage lender thinks you'll be able to sustain your repayments on the mortgage, then you're in with a chance.
Bear in mind though that most mortgage lenders are looking for a fairly hefty deposit, somewhere between 10%-25% of the value. It's worth checking out comparison websites to see what mortgages are on offer. Remember not to over-stretch yourself. If you borrow money and then your income drops, you could lose your house and everything you've put into it.
In the early stages, it can cost £3-5K for things like legal fees and estate agent fees. Many experts these days actually say you're better off renting than buying.
Apple: I'm considering a graduate loan to help out with money as I start a new job this week and won't get paid for ages. My partner has offered to lend me the money instead, is this really a good idea?
Pete: A lot will depend on how steady your relationship is and how far you're willing to make it a formal loan. I get lots of questions from people where they've borrowed from friends and family and things haven't gone to plan.
If this happens then a whole range of problems can come from it, especially from the person who has lent the money as they could end up going to court to sort it out.
Overall, it's not something I'd recommend as it's safer to go for a graduate loan. However, if you do feel your relationship is strong, it's good to draw up a formal agreement stating how much will be paid back and how often. This will be a good way of showing your partner how responsible you're being and that you're happy to have it all down on paper in case anything does go wrong in the future.
Apple: Can I just write it myself or does it need to be done with legal help?
Pete: It doesn't need to be done with legal help; so long as you draw it up fairly carefully. You'll both need to sign it and get someone to witness it. This can be done by a friend each to witness it from both sides; it does not need to be a solicitor.
Apple: That's helpful, thanks :)
Pete: Finally though, do avoid making any lending seem like a gift.
Apple: How do you mean?
Pete: If things did go wrong the main defence that you could make would be: "I thought it was a gift so I don't have to pay it back". If there's nothing on paper to say differently then there wouldn't be protection for your partner.
I'm not saying you would do such a thing, just giving the general advice for anyone who might be considering a similar loan.
Pete: OK guys, thanks for your questions.
Jo7: Thanks Pete and thanks for some great questions everyone.