UK Mortgage Expert: What First Time Buyers Need To Know

33:09So if you contributed£500 this month and you did£1 ,000, then you would buy like incremental shares of that home. So it's like a pot that tracks how much you've paid in. Yeah. So if one person wants to have like a better room in the house, I'll pay a bit more and get more equity. It's such a good product. I mean, it's just like, it's what you do when you rent, isn't it? like someone pays a bit more because they get the best yeah they got the better room or whatever

33:31Eddie Ross:what's you work with a lot of first-time buyers so i can feel how i am compared to the rest of the country what's the average age for first-time buyers in london and in the rest of the country i know it's different in london it's crazy as i just said my mom's 23 the average is about 34 nationally um and when you in london it depends what you read 37 to 38 um is the average first-time feels like that shot up in my lifetime as well yeah you know like i remember being younger and i feel like it was under 30 27 20 28 when i was even in london it felt like 31 32 a lot of my friends were getting on the average as well so you know an average is a i don't know if it's a median or a mean but it means a lot of people are way above that yeah you know there'll be first time buyers in their 50s basically i mean this guy i mean to be honest like you know i'm rent at the moment um london is a very like broad term like london where we are here nice residential like terrace house um very different to central two-bed new build apartment um and i think this is actually one of the problems is i don't i first of all i want to walk to work my office is in london bridge um what do i do do i buy a central apartment in london i don't think so first of all they're nearly a million pounds so i can't afford it service charge is just ridiculous so so who's buying these properties like that that's why the first time buyer age is going up in london because if you work in the city you don't want to there's from my perspective there's not a lot of desirable purchases that you want to make um so i completely understand like the london thing but then then when you look at london from a okay let's move slightly to the outskirts and buy somewhere that's commutable that's where i think it makes more sensible like purchase like a more sensible purchase decision yeah man i mean manchester certainly moved to more like a london market i would say there's parts of manchester now which i think are comparable to london in terms of a house like this in Hale is the exact same price, 800 grand-ish in Hale in Manchester.

35:45But I'm always conscious of when we're talking, when we focus on London, which Londoners tend to, 90 % of the population live outside of it potentially, and the markets are very different, aren't they? Yeah, they're completely different. As you said, so Cheshire, Hale, so I used to live around that area. It's gone crazy. It's gone crazy. is that you've really got to look at the, just in the way that we segregate London's property market, there are individual sort of micro local markets within counties, even cities, right? So what I would say about London is the central market doesn't look like an amazing investment in my view.

36:28I'm not a financial advisor. You come wider outside and you look at properties like this. I think that's where the sensible money's going. and then when you look at the other markets um Manchester is from an not necessarily investment perspective but in terms of previous performance in the last 10 to 15 years Manchester's done really well like Manchester Leeds Liverpool they've all they've all done really well in terms of like capital appreciation and price um for those that managed to buy their home um um but yeah so so what my advice is i guess is that when you when you generalize like manchester actually look at the markets in a closer detail and think because you might surprise yourself that as you said damien like a property here might be 500 000 and then a couple of neighborhoods over it might be 300 000 so look look a mile from where you want to buy yeah basically and that's the market because you could be so i don't want to bore people with northwest geography but you could be in Hale and in 20 minutes you're in Wigan and Wigan you know like a a terrace house in Wigan you could get for a hundred grand potentially whereas in Hale it's 700 right so you know and people go oh the northwest and they say it's not the same you know it's not the same um it I'd want to come back on something there you saw you talked about investment right do you do Tembo focus on home buyers as owners or do they focus on the buy-to-let market so really how do you view it as an investment piece at all do you think that people should even be asking is this a good investment or is this yeah i do i do not i do yeah i think i think you know buying a home is is first and foremost the the emotional connection of like buying something that you own maybe to potentially raise a family.

38:21So home ownership is just like a fairly innate trait, isn't it, in the UK? People just feel like they want to buy their home. So that's the most important thing. Is buying a home right for you and for your plans? And certainly the short-term plans, like two, three, four, five years. If you're not sure, potentially don't buy. Take my situation right now. I'm not buying in London because I'm not sure what's going to happen with the property price market in central london plus i can't afford it right i'm a startup founder you know you know don't do it for the money um so so what what what am i thinking about london i'm not going to buy it because i don't think i'm not if it was manchester or maybe potentially like more outside of central london that's when i'm thinking this is a this is a better investment for my for my situation yeah i I mean, the one thing is, though, it's a home, right?

39:18It's a place to live in and it's like an essential need. And I think if you're viewing homes from the perspective of investments, I would say there's better investments. Yeah. The stock market is probably a better investment. The one thing that the housing has is the leverage component, right, which is what makes it attractive typically. But I worry about people that go around going, oh, is this house that I really want actually a good investment? because it's like, well, where else are you going to live? And the alternative is renting. Have you looked at if that is sensible versus ownership? Yeah, we have.

39:51We actually did some research. So the reason why I think about investment or like commercial comparison is when you look at homeowners over a 20-year period versus renters, a homeowner is about 200 to 250 ,000 pound better off over that period just because they own their home. Assuming they live in the home. Assuming they live in the home. And that, by the way, isn't including capital appreciation. That is literally just buying. And what does that assume that the renter does with the money that they've not put down as a deposit, say? Yeah, so let's say they've got$30 ,000,$40 ,000 in their deposit.

40:31That might appreciate 6 % over the term. But the maths are still way in favour of the homeowner because you're buying that leverage effect. You're buying that capital in that property over time. And rather than servicing your landlord's mortgage, you're buying a thing that's your own. So, yeah, fair point. You've got to think about the opportunity cost of where you put that deposit. You could have invested it in the stock market in an ISA, tax-free gain. Yeah, but you've also got repairs on the house. You factored that kind of stuff in, like the maintenance cost. You've got more ownership costs for sure, but when you do the maths, home ownership is a big deal.

41:12It's between 200 ,000 and 250 ,000 versus... In a decade. Over 10 years. Over 20 years. Over 20 years. Just through the function of rent is dead money, in quotation marks for the people listening at home, I don't necessarily believe that, versus you build an equity position within a house, and that's the difference that you see there. That's the difference, yeah. But again, so what I want to come back to is the reason to rent and buy is not an investment decision. It's a flexibility lifestyle and kind of where I want to be in the world decision, right? I don't go to Bali on holiday for like two weeks and go, God, if I bought this place, no, no, no.

41:52I would be better off than just renting it for the two weeks. It's a lifestyle point, right? Of course it is. That's my point at the start. Number one is, does your lifestyle suit home ownership? like am i gonna move for me am i gonna move do i want to live in the same place for five years in central london probably not so it doesn't make any sense for me um from a lifestyle perspective at the moment to buy my house so you've really got to think you know you've really got to think if you're thinking about buying your first home what's my plan for the next five years um am i am I happy being in the same place for the first five years?

42:31And I say five years because two years, you know, by the time you've bought the property, you've paid for the cost, the stamp duty, all the costs involved, two years, you're not going to be, if you're looking at a financial perspective and the comparison we just said, you're probably going to be neutral, right? In terms of renting versus owning a home. And by that point, you may as well just rented, solved all, you know, not have any of the hassle of buying that house and had the flexibility. So you've got to look at your own situation um and one of the good things that's happened in the uk is um is becoming a landlord is not a great it's not as profitable it's not it's not a great like prospect um the i won't go into too much details about you know first-time buyers but it's unless you own a portfolio of companies buying a property to let out that you don't live in is is almost pointless now and you are definitely can't say that i'm not a financial advisor but you're almost definitely better just sticking it in a in a nicer at this point um unless you set up a company that does buy to less but then you really do struggle with with mortgage lenders you can find them but you're probably paying two percent more than the average two-year fixed um for that so yeah i am so i have a group company structure right um and there's profits within the business and i wanted a bit of diversification so got buy to let and like you say the lenders are few and far between the fees exactly oh my god the fees mate you're talking like five six grand on a mortgage fee on a house that's 150 60 grand plus the stamp duty of you know the extra stamp duty of eight grand so you're talking four ten percent in fees of like what i call tax a fee you know in that sense just to get into there um yeah it's definitely you lose your first time buyer status so you lose the stamp duty relief um so that's 300 000 you know so stamp duty for for every for the audience um just property tax when you buy your house um first time buyers get relief up to 300 000 pounds if you and then between 300 and 500 000 pounds property value you pay two percent if as a first-time buyer this is another thing that's changed if as a first-time buyer you buy a house over that 500 000 you don't get any relief so if you buy a property that's 501 000 you lose all the free relief uh up to like 300 so so you start paying normal stamp duty so so pretty tough in london yeah yeah yeah so so so i guess my point is like property values below 500k are much more desirable for first-time buyers than over 500K because of the stamp duty stuff.

45:15But another thing about the landlord situation is that's good news for first-time buyers because that's one of the reasons that supply and demand is reaching parity. So you've got landlords that are like, what is the point in this? I'm just going to sell it, which is great. That's what we wanted. That's well done government. We don't say that a lot, but that policy is working. we're taking houses off landlords and we're giving them to first-time buyers. Amazing. Yeah. It'd be good if they just built some more houses as well. That'd be helpful. Because one thing you would say is the rental market on the other side becomes, there's less choice on the rental market.

45:51Yeah. I look at the rental market in certain areas now. I put my house up. I'm the only house in that area for rent. Yeah. Like, what does that mean I can do in terms of rent if I wanted to? If I was unscrupulous, I'd be like 10, 15 people apply within a few hours. You know what I mean? Like, they're bringing in the renter's rights bill to stop all the bidding wars and all of this stuff. But exiting landlords is great for first-time buyers, really bad for renters, potentially, if there's not supply there. Yeah. Yeah, the supply of homes conversation, I think it's 1.5 million, the target. They're dreaming.

46:27I think, well, it looks like. So it looks like we'll be about 800, 900 ,000 versus the 1.5 million target, right? So there's a shortfall of house building and we need to keep that policy front and centre. We need to encourage more house building to increase the supply to keep the market not overheated, basically. And it feels like it should be social housing so that the government has some control over rental prices. Exactly. Because if you whack up a load of social housing in an area, you can influence the prices in that area, right? Right. And it feels like that would help the market a bit. Definitely.

47:06And actually, when you're a property developer now, so one of the reasons that there isn't as much supply is you've got to make it attractive for property developers, which have not had a great time in the last 10 years. And one of the things they've got to do, which is great, is if you build new houses over maybe more than 50 houses in one place, you have to have a portion of them of social and affordable housing, which is great. That means that new build housing developments that go up, that X percent of them will be available on either a shared ownership scheme, on the first home scheme, or like a potentially discount marketed value, which is incentivized by the developer.

47:54But I don't know if you come across the first home scheme that nobody talks about. No. Yeah. So nobody really talks about the first home scheme. And it's not a big volume for us either, but it's actually quite good. So the first home scheme means that when those property developers build those houses, that they sell a portion of those houses on the first home scheme at a discount to the market value. And that discount can be up to 50 % of the property value. So you're buying a home for 50 % less than it's worth, and the developer of funds that, right? Sounds amazing, right? But the downside is when you sell it, you've got to sell it to first-time buyers and also discount the market value by the same rate.

48:40So we haven't seen a lot, because the reason we haven't seen traction is because there's just not that many property developers building those first-time schemes. But my advice is have a look at first-time scheme you know it might it might be right for you it might be a less risky way for you to get

48:59Eddie Ross:your step and your foot onto the property ladder i love a discount i love a sale how does it work as a first-time buyer do you have to sell do you also have to sell it as a 50 so say the house is for simple maths uh 200k you buy it for 100k and then you keep it for like 40 years and you want to sell it do you have to obviously the price goes so it goes from 200k to maybe 250k do you then have to sell it at 125k that's right yeah okay that's right you get an independent valuation and they say it's worth this much and whatever you sell it for yeah so where's the other 50 % of the value go yeah well the property developer pays for it at this at the point when they sell the first house the incentive for them to do they have to as in like the affordable housing thing they they have to they have to meet their affordable housing targets so they can either do it on first home scheme um or shared ownership and shared ownership is often very different as in it requires a housing association a setup so so you'll you'll end up seeing first home schemes um pop up where there's new build developments can developers actually make money with these conditions i mean like i looked at because one thing that surprised me and i don't know if i might just be misreading this situation but we ensure that the house that i bought for more than the value of the house.

50:18So the house was 150, but the insurance was 200 grand. And I was like, is this house cost more to build than it's worth? Is that what's going on there? Because if that's the case, how are they ever going to build houses? Yes, it is definitely. Property developments, new build property developments are very profitable for their property development. They do make a lot of money. They make a lot of money. I'm not flying up then. They make a lot of money, but it takes a long time for them. One of the reasons we've not hit the target is it takes a long time for them to sort it out. Planning takes ages for them.

50:54You've got to select the right development. You've got to get approval. Because you've got to make it worth it for them. So I don't know if you've seen, but it's quite often that if it's a number of new-build houses, they'll either go really small to not have to do the affordable housing thing, or they'll go massive and like 500 properties. um so it's quite interesting like when you look at are they built like 49 houses and you're like oh because you didn't want to build any affordable houses you know is this nationwide or i think it is nationwide i think i've not seen it we have not seen many first home schemes um can you give me one if you find one yeah that's what i mean where are they is that forever so everyone who ever buys that home has to take that discount even like six generations down because you get this thing in like 400 years where people are what do you mean i've got knocked 50 off the

51:41Eddie Ross:process what's going on august to main did a deal we'll talk after this forever does it not just like yeah so what's that going to do to the value of those kind of units it's like the shared ownership exactly exactly people get stuck in them or they just they're not very attractive to shared ownership is it's quite fast i mean it's fascinating if you're a mortgage nerd like me but um like it is a fascinating area um and um it is exactly the same thing resaleability of shared ownership is just lower there's more conditions there's more things people have got to think about you have to get the housing association's approval um it's very there's a lot of stuff flying around like housing association what's that you know what is it well basically they're not-for-profit organizations that work with the property developer to say right we're gonna we're gonna make a portion of this shared ownership or all of it and we're gonna own the share of the property that the buyer doesn't own and they're going to pay us rent so they've got this dual sort of um like authority of they're the they're the landlord of that property but they're also sort of sorting everything out.

52:56So prospective tenants, tenants is a weird word because you kind of own the property, but they're seen as tenants until you own all of the property. Don't know whether to go to the building manager, the housing association. Sometimes they're different people. So they end up in this situation where service charges, for example, one of the biggest criticisms with shared ownership is uncontrollable service charges because they're not regulated. Sorry, they are regulated. They have to be reasonable. That's the regulation. What does that mean? Whereas ground rent, I'm sure you've seen, like ground rent, that is actually now regulated.

53:34You can't create - Can't double it every 10 years. Exactly. You can't do that anymore. So shared ownership, it serves a purpose. I think I'm probably on the negative side of shared ownership in terms of like, would I ever buy a shared ownership house? I wouldn't say no, but pick the right development. People just don't know how to do that, though. Yeah. And this service charge on houses is kind of, it's an odd thing, isn't it? Someone comes around every six months to mow the tarmac and trim the bricks. Just trimming your bricks, mate. 600 quid a week, that. What are they doing? Do they mow your grass for you?

54:14I don't know. It's just an odd thing, isn't it? They fix the lift, you know, 20K. But this is in flats. I mean, I was talking about the housing developments. Yeah. I think, again, it comes back to if you're going to jump into these things where they're like give discounts or shared ownership, are you buying the property for the right reasons? Are you just desperate to say, I own a home? And the good thing with the 50 % off ones that you were talking about before up to, if this is your forever home, who cares? If you're like, I'm never leaving. So I just get to own a home at a discount and pay this thing down really quickly and not be unencumbered.

54:49great but if you're planning to like sell on you might you might have some difficulties and be a bit trapped in that thing it's true yeah yeah we got some um we got some comments from people that

54:59Eddie Ross:were listening so do you want to read out marky b 4 4 marky b um mark b mark b i prefer marky b um like marky mark i'm in my late 40s and grew up with showing your age damn this is how we used to get the party started we used to anyway mixing the bacardi dog There you go. Good M &M notes right there for all you young people. I'm in my late 40s. I'm not. And grew up with it ingrained in me that you buy your own house. If I had my time again, I would rent until I had a family, just like me. All the financial models I've looked at say ownership makes no sense. Mortgages and student loan debt are a different level of debt versus earnings now.

55:41Eddie Ross:Plus, declining job market, etc. Wow. It's not really a question. It's more just like a rant. It's more of a statement. Yeah, a rant. Just the state of the country. Wow. Yeah. Very strong opinions there. But yeah, all the financial models I've looked at say ownership makes no sense. I don't know. I would rent until I had a family. Again, it's that thing, affordability improves loads once you've got a couple, right? Yeah. And should you sweat yourself? I think that's a fair viewpoint. It sort of ties into my, unless you're staying there for five years kind of thing. If you're not got a family and you're looking for sort of social mobility or you might want to work somewhere else, like, you know, I think I subscribe to that.

56:20I probably disagree with Mark on the, did he say the financial models don't make sense? Ownership versus -

56:27Eddie Ross:Ownership makes no sense. Yeah, I'm not sure about that. I'm not sure about the model there. Let's see a model, Mark. Yeah, show us how you worked it out. Let's see your working and your calculations. Same with the model, I think, yeah. But mortgages and student loan debt are a different level of debt versus earnings now. Yeah, student loans, eh? 9 % tax, the graduate tax. I mean, they're getting a lot of airtime at the minute, aren't they? Shocking. yeah yeah um declining job market he said but are our wages rising now but there's more youth unemployment right so it's a weird job market in that sense there has been real wage growth i don't know how long that will continue for and and i think it's it's always weird to say oh you're getting paid more because there's been a long period of stagnant yeah declining wage growth so you know it's improved again it's easy easier not easy yeah um and there's lots of people out there's lots of areas of the job market that i don't think are are doing that well we've got one here from thanks anyway mark we appreciate it mate we've got one here uh number seven so do you want to read that out mate is it got has it got said does it said who who andrea what ratio of your take-home income should your mortgage be great question um it depends you know politicians answer if 30 % is what you'll probably be told as a default of your take-home income should be your mortgage or rent payment, right?

57:50The net amount. So your net after-tax income, whatever hits your bank account, 30 % of that. That's right. And so that's probably, I wouldn't say it's the average. It's actually probably slightly higher, the average. But that's what you'll get told is the most sensible amount. If you don't have a family, because this is all about disposable income, right? and not being over leveraged or like overexposed to like paying off your mortgage and not being able to afford the things that you need to live if you don't have any dependents right you could stretch to 40 depending on your lifestyle um you know i my my take home my rent's 40 percent of my take home i don't have any kids um so so 40 percent anything above 40 percent you start to question like that that your existence yeah why am i doing this stupid house you're like 50 just go straight out of the bank just on the mortgage no you got council tax and all that so you're gonna be 67 in the hole so so it's because you're protecting against the what if scenarios really like what happens if i lose my job what happens if so what happens if my uh mortgage rates change so 30 % is I guess is the short answer I think um it's priorities again as well isn't it you know I know some people that never want to leave the house like in a nice way you know they're like no I'm not even bothered about going on holiday I just like being at home so you might go well I'll pay 40 % 45 % for that right to have them in my nicer place but if you're the kind of person that like tea you want to go on holiday six times a year

59:33Eddie Ross:business trips mix a bit of business with a bit of pleasure that's it paid by the company I like it yeah on record mate it's wild just to say that on record one of the biggest finance podcasts in the UK and you're there just like yeah a little bit tax dodging a little business little pleasure your missus and the tax man let's cut that out guys let's cut that out my boss is like what's all this about having fun on business trips yeah One thing I'd say about that, that is one of the areas where mortgage advisors, brokers, they have to assess your affordability from a monthly take-home perspective.

1:00:10And they will do a budget plan based on what your previous financial behaviors are. How much do you spend on food? How much do you spend on everything? thing um but what i would yeah so so and another thing is if you start saying i only spend 100 pound on food in a month lenders are gonna be like well you don't so they'll just take the average right so you'll never end up in a situation or i'd hope you'd end up in a situation where a mortgage advisor would recommend you a mortgage that you couldn't afford to pay because that's their job yeah um ben is a potential first-time buyer and says he's around 18 months from buying and he wrote in and said, I've seen some people talk about limiting spending before a mortgage application.

1:00:56Is this something that is still relevant? Yes, it is. I think it, there's a few myths flying around about spending before you get a mortgage. So lenders will look at your, when you get a mortgage, they'll look at your transaction history. What are you spending money on what is your typical sort of run rate again um over time how much do you spend on things so um limiting spending only matters if it becomes to the point where you're spending too much where you can't afford your mortgage now so i would say it's probably not as important as prominent as you think and things like spending on gambling i was gonna ask that you know any weird stuff online that you might do weird stuff don't look at me mate you're the one who likes toes don't look at me what are you on the map what a religious rumor likes toes what does that even mean i don't know but it's believable isn't it how did you pull that off the dome yeah i mean he doesn't actually like toes for the record i love them um sorry give me a second no that's good oh okay serious But yeah, my point is, yeah, don't stress too much about, you know, if you have a bet now and again.

1:02:21They're not looking for individual things. They're looking for patterns. They're looking for like, what's your relationship with your money like? If you're a compulsive gambler that's like all the time.

1:02:32Eddie Ross:Yeah, if you're the cash machine at 3am pulling out 500 quid, right? Or you're like, you're gambling at like six in the morning. like yeah they're gonna regularly or even even like twice i guess right if it if it shows like irrational well no if it's the world cup and you're betting a lot like may you gambling like maybe that's it's like the grand national oh you've had a flutter but if it's someone who's consistently gambling all the time but your mortgage advisor your mortgage advisor will look to see if you can afford it right so so they will look at your their job is to look at your transaction history and say like what what what are you spending what's the what's an actual acceptable monthly budget for you so so as long as you so if you're passing that it's very unlikely but it can happen that a lender's going to say actually you're not credit worthy because you know you've done too many gambling transactions it has to be a clear problem i would say um rather than oh you've had a bet are the world cups on yeah yeah i think the good thing about a mortgage advisor is they're basically preparing you for all that so if you're a bit worried about certain kind of things and you speak to a mortgage advisor you're not getting put in front of the court and and like kicked out they will probably say at that point look i don't think this is going to fly right exactly that's their job that's their job they're not going to recommend a product that you can't get yeah they'll say to you i think you will get a mortgage or like high levels of certainty so just speak to an advisor i think i think and you don't mind people coming to you two years out you know 18 months out that's that's okay no because that's the only genuinely that's the only because it's also you need that for your benchmark affordability as well how do you know what you can buy right now like if you go online and say how much can i afford in a user calculator that times your income by four you know income 50 000 that's not how income works your income's complex how often do you earn it are you self-employed is it two of you is it one person do you have any dependents when's the best time to come to you guys then like two years 18 months before you're thinking about buying or you get to honest your incomes was whenever you want um obviously shameless plug we are the only place that you can find out your affordability online um without actually having to speak to your advisor so come to us whenever um three years out five years out if you just want to understand mortgages a bit more you know that's what we're all about we're all about helping first-time buyers prepare for their home so all the way from five years away to you're going to make an offer on the property i'll call you this afternoon and be like what about them 50 % houses what about them toes um can we can we get a link to that of course thing that you do you do the you check your affordability on because i'm sure people have asked that so we'll fire that uh wet in the notes or whatever for ben and other first-time buyers what are some of the mistakes the biggest mistakes people make um i think they don't get they don't understand their affordability early enough so they end up in this sort of paralyzed state of not thinking they can afford to buy a home.

1:05:27My first suggestion is just figure out what you can afford right now. So that's one of the first mistakes. The second mistake I would say just be careful on the credit side. It's great to have credit and to pay off your, whether you've got loans, payday loans, et cetera, it is fine to do that. But if you miss a payment, it could potentially ruin your mortgage chances completely, potentially. So there are some, not forever, but there are some circumstances where you should definitely be careful from an adverse credit perspective. And then third, unsurprisingly, is they go direct to their lender to get their mortgage.

1:06:18That's like, why would you compare one product? They obviously have a really strong relationship with their bank, so I completely understand why, but your bank's mortgage advisor can only recommend their mortgage products. So my advice is to get a comparison of the market, go to a broker that's whole of market, compares all the lenders, gets you the cheapest rate, the best deal for you. um yes that's that's probably the three things i would say um where should people start looking at when they're trying to save where should people as in what should they do what should they do yeah um yeah sure so uh my first advice is so so first of all if you're looking to buy property and uh 400 000 450 000 lifetime isa is where i would start i love the lifetime isa my favorite investment vehicle of all time it's the goat it's free money from the government how often does that happen right so um you can get a you can get a cash lifetime isa or you can get stocks and shares lifetime isa's um uh i would say most often i think i think 85 to 90 percent of lifetime isa's are cash really yeah because because the last thing you want to do is is you know it depends on your your house buying a rise and if you if you're gonna buy in the next year or two i would probably advise cash so you don't see any like stock market like um changes because you put like 10 000 pounds in all of a sudden it goes to 7 000 like because the stock market's dropped but over time if you're doing five six seven year horizon then maybe stock stocks and shares lifetime isa so yeah number one is um is lifetime isa like that's where i would start saving you can do it either regularly with like a direct debit um or a one-off payment just for the audience you put in

1:08:02Eddie Ross:4 ,000 maximum a year and the government gives you 1 ,000 free cash yeah you and a partner can do that and you can kind of join up yeah so you can get 2k a year yeah what about the fact that there's rumors they're going to scrap it how do people look at that yeah so so they're not going to so they're going to change it for sure um and there's some good things and some bad things coming i would say um so one of the one of the downsides of the current lifetime isa is the withdrawal penalty and it's actually punitive. So you can actually end up getting less than you put in. And the reason they do that is to fund the bonuses, right?

1:08:40So they're going to get rid of the withdrawal penalty. We think, I should caveat that with this, they haven't fully confirmed it. They've said in 2028, we're going to launch a new lifetime ISA. We're looking at getting rid of the withdrawal penalty. We're looking at changing the way that you get your bonus. So at the moment you get your bonus paid immediately after you deposit the month after they're looking at changing them so no compounding bonus correct they're looking at changing it so you get your bonus when you buy your house controversially i'm going to say that's fine because controversial right yes i'm not i'm not a fan of that so so sure it's it's it's definitely a negative but one of the downsides of the lifetime isa is they're giving away too much money to people that aren't actually using it to buy a home So they're like, how do we make the lifetime ISA?

1:09:32We scrap the retirement bit, because you can use it for retirement as well.

1:09:35Eddie Ross:That's what I love about it. So I think when you get to 50, was it 60? What, you can actually... 60, you can take it out. When you can take it out, 60, yeah. Even if you don't buy a property, you can still take it out. And you've got to open it before you're 40, though. Yeah. Yeah. So, yeah, so the lifetime ISA... So, yeah, so controversially, they're getting rid of the... They're changing that. But I think when you look at it, They've got to find a way to make it. Lifetime ISA has to be for first-time buyers, right? If that's the product, having a dual purpose with retirement is why we're kind of in this mess of all what we're trying to try and claw back some of that money by.

1:10:11People that withdraw for the wrong reason don't get the full money back. Surely it's better that we don't punish people that end up not buying their house and we let them withdraw it without penalty and then make sure that when a first-time buyer is using it to buy a house that we pay them the bonus at that point. Because that's the reason we've kind of seen the trade-off. If you think it... See, I see it as a retirement product. I don't see it as a house buying product. Me too. I know it is a house buying product. That's why most people use it. But I also think it... For the self-employed, it's a very attractive pension.

1:10:42It's brilliant. Very attractive for self-employed. I'm not saying it's a bad... I think it's brilliant for retirement. In fact, it's actually the second best, isn't it? After a pension, it's the second best. It's number two. And for certain people at certain tax brackets, is better than a pension potentially because do you know what I mean like and for the self-employed their constant fear is oh god I might not be able to I might need the money so even though it's got a penalty it kind of just alleviates that my cash flows might drop and I might need the money thing yeah so if they eliminate that I think they're going to see a drop in self-employed retirement savings which is the complete opposite of what we want you know yeah yeah I just think I just think we'll then bring out a self-employed retirement pension yeah yeah just a better version of that like lifetime isa the dual purpose aspect of it is is why first-time buyers are getting punished um and why there's a higher withdrawal penalty and why there's this silly cap like why is there a cap on house prices yes it's absolutely mental like the i think it's nine years seven seven to nine years i should know this when the lifetime isa was launched and house prices have increased what since then 40 maybe like how can you not change the cap it's just crazy why have you got to wait till 2028 to do it?

1:11:51Have you got to wait till 2028? Why don't they just increase the cap now?

1:11:54Eddie Ross:Yeah. So we'll change for all lifetime ISAs, not just new ones. So the existing ones... I think it's very much, we are going to change things. It'll be in a few years. It could all get kicked down the road. You know, we might have an election near then. You know what I mean? I think it's very up in the air, mate. And I do think like, it's really sad for people that are trapped in them at the minute that want to buy in, say, London, that just can't. And they just face the reality of if they rip the money out, they lose. that's our number one number one thing that we get told by our customers you know why can't I withdraw the money that I put in why can't why can't this Labour government understand that if they'd make some quick wins they'd be a little bit more popular do you know what I mean put the internet on the trains and just up that on the lifetime ISO from 450 to 750 everyone will be happy it's worth clarifying that they have said that you said about changing our new one they have said that you can still don't worry about I don't want to give Lifetime Isosavers anxiety by saying they're going to change it.

1:12:52They've said that the current one is still going to be valid. They're not going to make it invalid or change it into a product that's undesirable. They'll honor the existing Lifetime Isosavers product as well as the new one. Awesome. Good news. So Jez Pesito. Jez Pesito.

1:13:08Eddie Ross:What a legend. What a legend. Is that his name? Jez Pesito. That's a great name. Jez Pesito. Jez Pesito. This is how he did it. He said, I want to know if anything is going to replace the Lysa. So hopefully we've answered that question. That can be used towards a property over 450K. Yeah, it looks more like tweaks from 2028. But again, that's a long time away for someone to sign. It's got all their money in there, isn't it? We've got last question to finish. And thank you for being so generous with your time. We do appreciate it. From Aaron. I'm sorry, but Jess Pesito has got the name of the day.

1:13:43Eddie Ross:He says, maybe a stupid question, but we have no stupid questions on the Making Money podcast. that's why I'm here. Maybe a stupid question. Let him say it. Maybe a stupid question, but I only have a credit limit of£2 ,000. Does this affect mortgage applications? Do I need to increase my credit limit and keep low utilisation? Wow. I'm impressed at the depth of the question there. So do you need to increase your credit limit? No. Does having a larger credit limit with low utilization over time mean you've got a bet you're more credit worthy from a lender's perspective yes um but it's not having a two thousand pound credit limit with either low or medium utilization even max that's not going to stop you getting a mortgage so it's not you don't have to stress about like your credit limit and maximizing it they will as the as i can't remember their name but they've pointed out utilization is important so what that means is how much of your credit limit are you actually using every month are you clearing off your debt and it goes to zero or are you maintaining the max balance that would look that would be a not a red flag but they'd be like why can this customer not you know pay off their debt every month what's happening there um so yeah so when you get a credit score online if you've got a large credit limit with low utilization that is the perfect all the way from like low credit limit max utilization that's probably the worst part and what if you're like me and you have zero credit limit like i don't have no credit cards no debt i just well apart from my student loan um yeah i don't i don't trust credit cards so i pay for everything i pay for my car that is a is that a bit shaky it's a bit of a problem because because how do the lenders know you're credit worthy you can just look at my track record of paying rent on time which they will yeah by the way with the track record mortgage um or any mortgage but um you you're gonna want some level of credit yeah my my advice Phone contract?

1:15:42Yeah, phone contracts count. Utility bills? Utility, yeah.

1:15:45Eddie Ross:So it doesn't have to be a credit card. It can just be regular payments that you... Basically, can a lender find you in the credit bureau database of proving that can you pay off your debts? I tried to get a car on finance. I said, we can't find you anywhere. Are you sure you're a real person? I'm like, I don't have any credit anywhere. I had to pay for all. I mean, I wouldn't advise people to start opening credit cards, especially if you know if the temptation is there to spend money on it but if if you're very self-controlled open a credit card with a low credit limit and don't use it that would be better than not having one yeah I do think as well though so true story I I recently booked a holiday put a load of money on a credit card because I wanted the protections and stuff and then a house came up and I was like I want to live in this house so we're gonna buy it and I I was nervous because I was going to my mortgage advisor like literally five days ago.

1:16:38I've just maxed out my credit card. And he just looked at me and was like, that's fine. Yeah. It's no issue. It's fine. So the mortgage lender will have seen that I spent like thousands in a day and they weren't bothered. So I wouldn't sit at home and think, oh, no, it's a disaster. Again, speak to the mortgage advisor. You might be in a better position than you think. Missed payments or defaults or county court judgments, bankruptcy, debt management plans. They're all more serious sort of adverse credit flags that a lender will look at. So if you fall into one of those categories, you know, mortgage advisor is definitely required, I would say.

1:17:18If you've got mispayments, a few mispayments, CCJs that you've been active or maybe they're even like satisfied, debt management plans you've had in the past, if you've been bankrupt. Even if you've been bankrupt, you can still get a mortgage. It's just really hard. Yeah. Cool. awesome cool is that a good place to end on bankruptcy

1:17:42okay to main what do you think about that one i'm feeling very positive very charged up i was a

1:17:47Eddie Ross:little bit stressed about buying my first property but for self-employed people there was options i like that he gave us loads of practical tips um double owner sole proprietor sounds quite interesting if i can say it um yeah it's not it's i like it when we give good news and i'm feeling a lot more positive some good products really i thought mortgages had kind of been completed but there was some stuff in there that i'd not heard of like they're putting the loan in the bank account and then you still get access to it that that sounded quite interesting if you're if you want to we spoke about some links in that didn't we so we'll link those wherever you get the links so if you're listening on audio or are watching us on video hello to the people watching us on video the people on audio can listen to you breathe the people on video can see this awesome outfit i've gone he's butt naked i know you're wearing you're wearing like a blue suit no a blue nigerian suit for my tailor yeah what what would they call that suit traditional wear has it not got a proper name probably mboyo or something like that means white man yeah it does i remember me i remember anyway sorry we'll link all of the stuff in the linky place that you need and if you are watching on video and you're not done with mortgages and you want some more content watch this video right here to everybody else we'll see you later peace we won't see you because you're listening we're not very good at this are we we do what we can is that my breathing yeah like darth vader got big lungs mate yeah

1:19:28normally this is where we'd say this isn't financial advice and it really isn't but if you want to speak to a good financial advisor then we might be able to help we've partnered

1:19:36Eddie Ross:with a few advisors to offer a range of services from one-off flat fee guidance to ongoing advice i'm actually using the guidance service to sort out my finances if you'd like to understand your options there's a link in the description where you can answer a few questions and then book a free call with my colleague will so you can figure out what might be right for you this episode was produced by Ruth Edwards and it was filmed and edited by Ben and Jack at Flow Spire. See you next week.