Full Transcript
Dr James:
You’re not stale. Oh, but you know what? We just hit record and record, as Sarah said. But you’re not stale, james, you’re not stale, but it’s fine because we’re going to keep it in. We’re going to keep it in. We’re going to keep it in. And the reason we’re going to keep it in is because we were talking about how sometimes, whenever it comes to finance, it’s too pale, male and stale. And we’re actually here to completely unravel that today with the podcast subject at Matter, which is mortgages and maternity. That was. That just happened completely off the cuff. We didn’t actually script that, but I think that’s an amazing intro to the podcast. Sarah, how are you?
Sarah:
Yeah, good, good, hi, james, Thanks for having me on again.
Dr James:
Always a pleasure, always a pleasure, always a pleasure. So, sarah, anyway, back to what we were saying just then. Well, obviously you’re a returning face in the podcast. You’ve been on a few times now, which is amazing and you and I were literally just chatting before I hit the record button Totally my fault, because I hit it out of the blue and I didn’t warn you. We were literally just chatting about how, actually, sometimes, when it comes to information on finance, well, there can be a little bit of what is the terminology that I’m looking for Maybe a bias in there, or maybe it’s not as accessible to everyone as it could be and one of those areas is making information with regards to mortgages and the considerations that we have to allow for whenever we’re on maternity leave, making information on that more available, which is exactly why we are shooting this podcast today. So, on that very note, sarah, what are your thoughts on that? What are you? In fact, before we talk about the subject matter, I had one of your thoughts, what I just said do you think there’s a bit of a gender gap there?
Sarah:
Well, I think there’s major discrimination going on with Lenders. So this is self-employed, so be a dentist or anybody. So I had this exact scenario with one of the UK’s largest lender, high street name, where they will actually work off one-year accounts. So I could have a self-employed dentist, one-year accounts and they will work off a one-year accounts plus a projection of the accountant, Right? So I’ve got a client who has a mortgage with said lender and she has had maternity. So because her maternity leave staggered over two tax years, it affected her tax returns for two years on the banks. But the last tax return, which was up until April 23, that showed a full year of going back into dentistry, full time, full year, so over 90-odd K in earnings. So I thought no problem, that would be fine because that lender will do one-year accounts plus a projection of the accountant. If I even got her tax return from the three years previous tax return which showed her income pre-enimaternity, so I’ve got a really good history. We could get a projection of the accountant, bearing in mind we’re 10 months into the next tax year. So the accountant can give a very, very good projection and they’ve declined it. They won’t do it. She’s got an only redemption penalty on her mortgage and they will not do it. She has got I’ve got loads of lenders, but we’ll work it on the evidence that I’ve got. But that said, fortunately I didn’t give the advice when this client took the mortgage out. But that could quite easily have been me, and that’s the thing. Mortgage brokers, as well as dentists or anything. You don’t know what you don’t know.
Dr James:
There we are. Wow, Okay cool. So did you select an alternative provider?
Sarah:
Yeah, we’ve got a mortgage offer with another lender, high street name the rate is actually, you know, very, very competitive, so it’s absolutely fine. But this client has got to pay £2,000 to exit the other lender as an early redemption penalty, which is frustrating, but it’s, you know, she’s able to move on. But then I’ve got another client who has had three babies over a five tax years. So she has got the same problem. She’s got five years of tax return with maternity in them because she’s bagged five tax years. And so that’s all I would say is any females and I can be biased, that’s cool. Although they can take maternity. But I can be gender biased here, yeah. So any females that are thinking about having a mortgage and maybe hoping to have children at some point in the future, yeah, perhaps speak to a broker and make sure that they’re thinking about not just today, thinking about the future as well, because it might mean that you pay 0.2, 0.3% more on the rate now, but you’ve got that flexibility going forward in the future.
Dr James:
Gotcha, so you would pay 0.2, 0.3 extra on the re-it.
Sarah:
That would happen because you’ve got a lender that will be a lot more flexible in the future than a lender who may be very mainstream market one of the UK’s largest lenders and you might think, well, I’ll go there, it’s a recognized brand and they’ll look after me, but they might have the best rate in the market. But sometimes it’s not always about the best rate. It’s about the best to suit your circumstances.
Dr James:
Got you Okay, so totally hear you. So can you give me just a really crystallized answer? You know, when you talked about that additional flexibility, we’re from ours to accepting a higher interest rate. How might that additional flexibility look specifically?
Sarah:
Right. So my client who is with the number one UK’s number one lender. She is having to pay 2,300 pounds exit penalty for coming out of her fixed rate earlier than what she’s contracted to pay for. So the rate actually ends at the end of May. She can’t delay her new purchase until the end of the month or beginning of June, so the early redemption penalties are payable. Now most lenders will allow mortgages to be portable, so you can take that mortgage with you to the new property. But because you’re moving home, it’s full income and affordability assessment and because she’s only got one year’s account.
Dr James:
Right, I’m with you and I.
Sarah:
They won’t do it.
Dr James:
Right.
Sarah:
I see. So she can’t move transfer because that would be my first recommendation, or certainly the first thing that I look at is keeping with your existing lender and moving that across to the new property to avoid paying that exit penalty.
Dr James:
Yeah.
Sarah:
But yeah. So it might mean that, you know, we’ve got that scenario where I’m looking to give somebody advice and they hope to perhaps have children in the future. They’re thinking about taking, let’s say, a five year fix. So they’re going to be locked into that lender for five years. Well, what if they move home within five years? What are the chances of that lender transferring that mortgage over, even though you know and this is what the misconception is Well, I’m just transferring the mortgage over, they’ll move it over. They’re not obliged to. Lenders are not obliged to. It is still full income and affordability assessment. They still have to do a full assessment. So, even if you’re not borrowing any more money, like in this scenario she was, I think. If it was a case of she wasn’t borrowing any more money, I think they probably would have done it. But you know, nobody knows.
Dr James:
Okay, I’m totally with you now. So they reassess your income each and every time. And then, obviously, if we’ve been on maternity, well, income isn’t quite where we’d expect it to be, given that we’re self employed as Dennis, right?
Sarah:
Yes, and the majority of lenders you see will. Once you’ve got two years of accounts, they will average your last two years figures, which is what happened in this. She got one year fully back full time, but the previous year, because she got that maternity in them and being off for a lot of that time, the average of the two years was much, much lower. It was like 50% of the latest year’s figures Big time.
Dr James:
Okay, let’s talk about the men as well. How about that with paternity? But I guess that doesn’t really affect their income as much, because they don’t tend to be off for as long.
Sarah:
Yeah, possibly not, although under the maternity law you can. You know you can have up to a year of rope and you can split that. However, the women don’t have the time. You know, the woman could have life a month off and then the partner could take up to 11 months off.
Dr James:
Gotcha, gotcha, gotcha, gotcha. Okay, cool, no, I’m just, I’m just, I’m just, I’m getting my head right, all of this and this, and it’s it’s useful to know, because what we’re basically saying is high level. Is this is a consideration for families? It’s a consideration?
Sarah:
yes, and you know, as I say to, as I say to clients, the main thing is is that you’re in a good position to make an informed decision. If you have all of the facts, that all of the potential problems that might be there in the future, it might be that you don’t have a choice. You know. It’s like there is one lender that’s going to lend me money or the money that I want, and I’ve got to take it a lever. So you know, but but you know it’s very rare that clients are in that situation. There’s normally, there’s more, normally, more than one one try.
Dr James:
Gotcha. So what are these potential penalties look like? Is it usually a fee for leaving the terms of your fixed mortgage?
Sarah:
It can range from, typically, I would say, between 1% of the loan outstanding and 5% 5%, that could be a lot of money. Yeah, so if you’ve got half a million mortgage, 5% you’re looking at a 25K early redemption penalty.
Dr James:
No thanks.
Sarah:
No, no, no, no no.
Dr James:
Especially if it can be avoided with a little bit of planning.
Sarah:
Yes.
Dr James:
Yeah, gotcha. Anything else potential parents need to know whenever it comes to mortgages. Is that the main?
Sarah:
thing, if you’re going to be putting children through private schooling, again that lenders take that into account on affordability and that can have a massive impact on what you can borrow. So again, you don’t really want to be coming off a rate and with a lender that’s not very good at offering their existing borrowers follow-on rates or good follow-on rates. If you’re going to, you know, come off a rate and you’ve got school fees and you’re going to struggle on affordability because you know you might have school fees and one person might have reduced their hours and therefore working less. So you’ve had the double whammy in the fact that you’re earning less income and you’re out going to increase. So you know you might not actually be able to borrow what you currently have. So then it’s sort of taking that into account in the future so that you make sure that you’re with a good lender that offers good rates to their existing borrowers or lock in for a longer time to ride through that way.
Dr James:
Gotcha. So this can all be helped with good planning.
Sarah:
Yes.
Dr James:
I see Definitive yes right there. Okay, that’s what we like to hear. We like definite yeses. We like definite yeses. Amazing. And in your experience, is this something that you run through, in your experience with your clients and over? They come to you and is there a certain, is there a certain demographic that we maybe have in mind whenever we’re saying these things?
Sarah:
You know a lot of my clients there probably you know, right from just graduated, finished the through to. You know people that are redeeming their mortgages. I’ve got quite a few of those clients because I’ve been working with dentists now for 20 years, so I’m now in there and now starting to see some of those going through and actually paying their mortgage is off because interest rates are much higher than what they were and you know they’ve got the means to pay it off so do everything. But I would say that you know people that sort of, perhaps in their sort of 30s, 40s I deal with a lot of those maybe buying practices and or buying their forever home or the final, their family home, and so that’s when they tend to sort of max out on on everything. And that’s probably, you know, the time when things are the tightest, when when they’re buying their lord, their family home, they’re having, they’ve got young family and maybe you know one, one party is working slightly less, so reduce income and that’s possibly that that the tightest time that my clients might say.
Dr James:
Gotcha. Okay, good to know. Well, listen, sarah. I actually think that that is probably a really good moment to round off this podcast. Let’s keep it powerful, impactful and, you know, as concise as we can. So, on that very note, sarah, if anybody wants to know anything more about what we talked about today, how would they be better off getting in touch with you?
Sarah:
Through the website. Sarah at sorry, that’s my email address wwwsarah-gracegracecouk, or um, and that’s got a, that’s got a let’s talk um email so you can email through that, that that comes through to me and my team so somebody will always get back to them or have a look at the website. The website um, uh, got our phone number on 0203 6333, so we check away.
Dr James:
we have the technology we have the technology, we can do anything. The year is 2024. There we are good stuff, okay, cool. Well, listen. Thanks so much for your, sarah. Uh, thanks so much for your time today. Oh, you’re lovely. Thank you, james, always a pleasure. I’m sure we see each other again.
Sarah:
Very, very very good, yes, see you soon, bye, bye.