At Chilvester Financial, we provide a wide range of financial protections and insurance, all designed to help you make the best decisions for you and your family now, and in the future. Critical illness cover is something we get a lot of questions about. It turns out that, while lots of people know what life insurance is, many people aren’t aware of critical illness cover, and how it can actually be more essential than life insurance at times. So today we wanted to take a look at what critical illness cover is, how it works, and why you might need a policy of your own.

Why Would I Need Critical Illness Cover?

Simply put, because statistics show you will probably get seriously ill at some point in your life, and you don’t want to be at a financial loss because of it. Critical illnesses like cancer or heart attacks can leave you out of action for weeks, months or even years, not able to work at your full capacity or at all. If that were to happen, your pay would likely be reduced, since sick leave can usually only cover a certain amount of time at full pay. Worrying about money is the last thing you need when dealing with a serious illness, which is where critical illness cover comes in.

What Is Critical Illness Cover?

Critical illness cover is a type of life insurance policy, but instead of paying out on your death, it pays out a tax-free lump sum if you are diagnosed with a critical illness or specific medical condition. The exact number and variety of conditions covered will differ depending on your insurer with anything up to 90+ conditions, but there are four core conditions that tend to be covered by all critical illness policies:

• Cancer
• Heart attack
• Stroke
• Multiple sclerosis

Legal & General, one of the biggest insurance companies in the UK, issued a report in 2017 that shows that 64% of critical illness claims were for cancer (with female claims for cancer higher). Heart attacks made up another 10% of claims and strokes another 6%. So in total, 80% of all claims in 2017 were for Cancer, Heart attack or Stroke. The average age for a claim is 47 showing that critical illnesses can happen at any time and not just in old age. If you have critical illness cover in place and you are diagnosed with a condition covered by your policy, then you will be eligible for a pay-out to help support you and your family during a difficult time.

So How Does Critical Illness Cover Work?

In a lot of respects, critical illness cover is very similar to life insurance. You take out a policy over a certain number of years (usually the length of your mortgage term, or until your retirement date), and you pay a premium each month to keep the policy going. If you need to claim, you talk to your provider and arrange a pay-out. These usually come as a one-off tax-free payment, but will vary from provider to provider, so make sure you check with them. There are no rules on how you spend this pay-out either, so you could use it to pay off the mortgage, contribute towards living costs, medical bills or care expenses – whatever makes your life easier!

But like any life insurance policy, it is important to read the fine print carefully so that you know exactly what your policy covers. The list of conditions your policy covers might be very long and even if your illness is on the list whether or not you get a pay-out and what size it is could depend on how severe or permanent the condition is. For example, some policies won’t cover some forms of easily treatable cancer, a mild stroke or a mild heart attack (which are often excluded based on severity). The insurers are increasingly doing more to help in this area so most now offer a set of reduced pay-outs for less severe critical illnesses like these. You are also less likely to be able to take out critical illness if you have already been diagnosed with a serious condition, so this is definitely one to take out in advance.

This is one of the reasons we say you need to think about insurance while you are healthy – not when you find out you’re ill. This is a situation we come across all too often, and once you have a serious condition there’s a limit to what we can offer you. So rather than wait until then, we highly recommend looking into critical illness cover sooner rather than later.

If you run your own business, critical illness cover can literally keep things afloat if you were to suffer an illness or injury, and if you have a family to care for, it’s an obvious choice.

If you’d like to know more about critical illness cover in general, or what Chilvester Financial can offer you specifically, just get in touch with us today to book your consultation.

Buying a property isn’t a simple process. There are a lot of steps to take, hoops to jump through and things to remember. In fact, if you’ve never done it before, it can feel a bit daunting. And that isn’t helped by the fact that there’s so much new, property-specific lingo to learn so that you can keep track of what’s going on.

Something we’ve noticed is that mortgages in particular seem to trip people up. While most people have an idea of what they are even if they haven’t bought a property, not many people really understand the ins and outs, and how it impacts your ability to buy a home. So today, we wanted to give you a hand by featuring some of the most common mortgage questions we get asked – and answering them for you!

What Is A Mortgage?

Let’s start with the basics. A mortgage is a loan that you take out specifically to buy property or land. They work in a different way to normal bank loans, and last a lot longer. Typically a mortgage may run for 25 years, but you can get shorter or longer terms if you need to. The value of the loan you take out is ‘secured’ against the value of your home until you have fully paid it off (which is why you see adverts saying that your home can be repossessed if you don’t keep up with the payments). Generally, you pay your mortgage back in monthly installments, which can be reducing the amount you owe, or just paying the interest, depending on what kind of mortgage you have.

Wait, There Are Different Types Of Mortgage?

Oh yes! There are lots of different types of mortgage out there, each designed to help a certain kind of person afford their own home. While we can’t list all of them here, the most common options are:

• Fixed-Rate
• Variable Rate (which have around 4 sub-mortgages with different interest options)
• Interest Only (which have become less popular recently)

There are also a few ‘scheme specific’ mortgages, like the Help To Buy mortgage or a company director mortgage, which are targeted at a very specific type of person.

What Is A Decision In Principle, And Why Do I Need One?

An Decision in Principle (or DIP) is a document that confirms how much money you can borrow and from which lender. To work this out, the lender will ask you questions, carry out a credit search, view your credit score and maybe even ask to see documentation to prove that you can afford the amount you’re asking for. Once you’ve been approved, you’ll be sent an DIP certificate. This usually only takes a matter of hours, but some lenders do take longer to process things. Once you have an DIP, you can confidently go and make an offer on a house, knowing that you have the funding behind you. It’s not essential, but it’s a good idea to have, as it can help you feel more secure in the buying process, and make you look like a more attractive buyer.

How Does Applying For A Mortgage Work?

Generally, applying for a mortgage is a two-step process. First, you will need to do some basic fact finding to work out how much you could afford, which mortgage product is right for you and which lenders would be willing to work with you. That can mean a lot of backward and forwarding with banks and lenders, lots of meetings and hours wasted with lenders who could ultimately say ‘no’. So we recommend working with an adviser (like us) to help cut through that fuss and find the right lender for you, quickly.

Once you know what you need and who will help, you can begin the application process. The lender will do a full ‘fact-find’ into your financial situation and history, as well as an affordability assessment for your payments, and the impact any interest rate rise would have on your ability to afford your repayments. You’ll need to provide evidence to help them do this, and when they’re finished, you’ll be told if your application has been accepted or rejected. If it’s accepted, then the lender will provide you with a ‘binding offer’, which comes with a 7-day ‘reflection clause’ so that you can make comparisons and consider the implications of accepting the offer.

At Chilvester Financial, we spend a lot of time with first time buyers, helping them understand the process and guiding them through what to do next. The mortgage is a pretty big chunk of the administration of buying a house, and it can be a bit daunting to try and go through it along. Add into that the fact that most high-street banks will only offer you 2 or 3 choices, with no flexibility to fit your needs, and it’s no surprise people get so stressed when we say the word ‘mortgage’! Our experts have access to a wide range of mortgage suppliers – not just banks, but independent lenders as well, so we can find the right deal for you, instead of trying to cram you into a box that isn’t a good fit for you. To find out more about our mortgage services, just get in touch with the team today.

There are quite significant differences between standard domestic mortgages and ones for a commercial property. For a start, while many home mortgages are suitable for a wide range of customers, commercial products tend to need a bespoke solution and are generally more complicated.

That means you won’t find any online commercial mortgage sites that offer instant decisions when you put in your details.

What is a Commercial Mortgage?

The purpose of the commercial mortgage is essentially the same as the domestic one. The mortgage is taken out, with the business property as collateral. This can be for any property including an office, retail store or even something like a garage.

Commercial mortgages can vary in length depending on the deal that is offered by the property owner. This is normally anything from between 3 and 25 years.

There are no set rates when it comes to commercial mortgages mainly because each one is different and a lot will depend on the risk level involved. In general, however, the bigger the loan and the lower the risk, the lower rate you might pay.

Types of Commercial Mortgage

There are generally two different types of commercial mortgage. The first is owner/occupier which essentially means you will be running all or part your business from the property. The other type of commercial mortgage focuses on investment or buy to let properties, situations where the mortgage holder is not using the property themselves. Each type will have certain conditions associated with them.

Disadvantages and Benefits of Commercial Mortgages

While buy to let and investment mortgages have their own pros and cons, if you’re buying an office or store for your business there are certain things you need to seriously consider.

The first is that switching to a commercial mortgage can be beneficial by protecting you from sudden rent rises by the property owner.

You can also, if your lender agrees, sublet part of the property to another business in order to offset your costs.

The interest you are going to pay on the loan is tax deductible and you can decorate and improve the property without needing permission

There are some disadvantages, especially if you are a start-up or fairly new business. The first is that you normally have to find a fairly hefty deposit to obtain the commercial mortgage in the first place. You also have to take control of the maintenance of the property and, if you do suddenly need to move because your business is growing or has folded, it can be difficult to do so because of the financial commitment.

How Are You Assessed For a Commercial Mortgage?

All mortgages for commercial properties are looked at as individual cases by lenders. For an owner/occupier mortgage, they will look closely at your business books as well as what you are projected to earn in the next year or so. This can be quite invasive but the lender will be keen to ensure that you are able to afford the repayments and will always do the due diligence. If you are a buy to let landlord, the lender will need to look at your current portfolio and examine your rental agreements. They will also look for a minimum term for the mortgage, usually 3 years, but this can vary depending on your provider.

Finding a Commercial Mortgage

This is the hardest part for many businesses. Banks aren’t the best places to start as their rates tend to be higher, at least not since the financial crash. That’s why it is sensible to use the services of a commercial mortgage broker who knows the market and will be able to negotiate a better deal for you.

At Chilvester Financial, we work with businesses and individuals to help them get the best commercial mortgage they can. Because we have whole-of-market access, we can usually find deals you wouldn’t see anywhere else, and be approved when you might not otherwise. If you would like to know more about commercial mortgages or find out what we could do for you, just get in touch with our team today to arrange your consultation.

 

Retirement might feel like it’s a way off for you yet, but it’s never too early to start preparing. After all, for most of your working life you have (hopefully) been contributing to or building up some form of pension, to fund your retirement – and you’ll want to make the most of it when the time comes. But if you’re thinking that maybe you’d like to stop working in the next few years, then there are a few things you need to get in order and choices you’ll need to make now. To help you prepare, we’ve put together a checklist of things to make sure you’re ready for retirement

Work Out Your Likely Retirement Income

First things first, you need to work out how much money you’re likely to have to live on in retirement. This will form the basis of most of your other decisions, so it’s best to do this first, around 2 years before you stop working. To do this, you’ll need to:

Get a state pension statement. If you don’t already have one. A state pension statement is a good place to start. This will give you an estimate of how much state pension you might receive, based on your National Insurance contributions so far. You can request this for free at the GOV UK website.

Add up your savings and investments. While a pension is a great way to save for retirement, it’s not the only string to your bow. You might also have other savings accounts, investments or bonds that you could use to increase your income when you retire – so track these down and add them up.

Track any lost pensions. Changing jobs can mean that you leave a pension pot from one employer behind. But even if you’ve left, you’re still entitled to that pension. By retirement you might have amassed a few of these, and not remember where they all are. Finding them can be tricky to do on your own, but with the help of an adviser like us at Chilvester, or the Pension Tracking Service, you should be able to discover any and all pensions in your name, no matter how old they are.

Don’t Take Risks With Your Pension

Right now, you’re probably at a time in your life when you’re starting to consider retirement a bit more seriously (otherwise you wouldn’t be reading this). This means you’re at the point where you possibly need to start restructuring your pension. If you have a personal, stakeholder or workplace ‘defined contribution’ pension (where you build up a pension pot), then some or all of your money is likely to be invested in funds. This is no bad thing, but as you get closer to retirement, you might want to start moving your money into lower-risk investments. This shouldn’t be an overnight thing – you can start moving money to low-risk options as early as 10 years before you retire if you choose to. Some pension funds will even do this automatically for you.

But be careful – this is also the time where you are most vulnerable to pension scams, and you don’t want to lose your pension that way. If you’re not sure about how to restructure your pension, or think you might be the target of a pension scam, talk to us and get some advice.

Your choices here can shape your income for the rest of your life, so it’s important you have all the information before you go ahead

Boost Your Pension

If your retirement fund is looking a little lower than you would like, then the scope for making major changes to boost your pension pot is limited. But that doesn’t mean you can do nothing at all. If you know ahead of time, you can focus on putting more into your pension, and put back the date you start drawing from it. This increases the amount you’ll have to retire on and decreases the amount you need in it, since you would have a shorter retirement overall.

Budget For Changes In Day-To-Day Spending

At the moment you probably have a pretty good idea of what you spend during the course of a normal month. You’ll have a pattern of day-to-day spending that suits your current situation, and be happy with it. But when you retire, you’ll need to adjust that pattern to suit your new lifestyle. Work-related costs (like travel to work, lunch and work clothes) may go down, but spending in other areas (like heating, healthcare or leisure activities) may go up. Prepare yourself a budget that looks at:

• Where your income comes from now and how you spend it.
• What your likely post-retirement income will be, and where your spending may change.
• Any changes you might need to make to live comfortably in the years ahead.

Clear Your Debts

It’s normally a good idea to go into retirement as debt-free as possible – especially since your income may go down in retirement, making it more difficult to repay any debts. To do this:

• Add up how much you owe (on credit cards, personal loans and your mortgage, if you have them).
• Check the interest rate you’re paying on each debt.
• If you have money spare, pay off the debt that charges the highest interest first, and then work backwards.

A lot of people will also opt to use their pension tax-free cash lump sum to clear bigger debts like a mortgage or loans. But depending on the type of pension you have, this can be an expensive option, so it’s always worth getting a second opinion before you go down this route.

When To Take Your Pension

Now, you need to set a target date when you want to start drawing an income from your pension. It’s important to remember that you don’t have to stop working to take your pension, but you do need to be over 55 (or if you’re in very poor health, you can take it earlier). When deciding when to start drawing your pension:

• Check your nominated retirement date and whether this is still in line with your goal.
• Think about how you want to take money from your pension, if it’s a defined contribution pension scheme. The new pension rules mean you can take money out of it however you like – so you need to choose an option that will suit you. If you’re not sure of your option, contact us for advice.

Get Advice

Above all, we urge you to speak to a financial adviser before you make any of these decisions official. Your choices here can shape your income for the rest of your life, so it’s important you have all the information before you go ahead. At Chilvester Financial, we love helping people plan for their retirement. We help our customers unpick even the most complex pensions arrangements, understand what their position is, and choose the right option for their future. Then, we help them achieve it with ongoing advice, support and financial management. If you would like to know more, just get in touch with the team today.