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06 Nov 2019

Seven ways to help staff manage their housing costs and save for a mortgage

Do you remember the story of The Magic Porridge Pot? It’s the tale of a poor, hungry girl gifted a magic pot which produces endless food on command. If only it was possible to recreate the same overflowing pot when it comes to employee finances.

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The concept of money pots (also known as the jam-jar method) is an essential tool in making money go further. It involves the allocation of income into separate virtual or physical pots for different expenses, allowing spending and saving to be better managed.

Yet the employer focus has traditionally been on helping staff grow one pot of money – the pension pot. While this long term planning is essential for all staff, those who are in the earlier stages of their careers are more likely to have many pots they need to fill more urgently, including saving for a mortgage.

Below we explain how employers can help their staff better manage their housing costs and fill their housing pot, through a financial wellness programme that includes mortgage advice as a crucial element.

1. Check what they are spending on housing already

Help your staff to work out whether they are overspending on housing costs. Have they assumed that renting is cheaper than a mortgage, not realising that often it can be the opposite? Are they spending more than they can afford? A good guide is to spend around 30% of gross monthly income on housing, but when renting it can be tempting to spend more than you should.

2. Help them understand if they have cheaper options open to them

If your staff are overspending do they have less expensive alternatives available to them to reduce their housing costs? Could they downsize, relocate to somewhere less prime, house share or even return home to parents to help them release extra cash to save for a mortgage?

3. Give them something to aim for

Many of us need to be set goals to achieve success, so why should it be any different when it comes to home ownership? Allow your staff to understand how they may be able to afford their own home, even if they don’t feel quite ready yet. Give them access to advice that helps them see what and where they may be able to afford to buy and all the costs that may be involved. Such education will give the focus they need to motivate them to get mortgage ready.

4. Get them saving rather than splashing the cash

Help them on the way to their target by encouraging them to reduce or consolidate debt and start saving. Encourage more responsible management of money, either through a wider financial wellness programme that includes debt or savings solutions, or by communicating simple financial wellness tips, such as the need for budgeting or putting aside savings on pay day.

5. Ensure they are mortgage ready

Mortgage lenders look for a number of key financial attributes when assessing individuals. They want to see a good credit history and credit management as well as sensible general spending too. In assessing affordability, habits such as takeaways every other day not only eat into spare cash but will do little to impress lenders that your staff know how to manage their finances responsibly.

Communicating simple tips, such as being on the electoral register and using schemes that use rental payments to improve credit scores can also help.   

6. Educate them on other options that may help

For those struggling to save enough for a deposit, educate them on other options they could use to help boost their mortgage pot. These could include help to buy schemes or accessing the bank of mum and dad via guarantor or parental support mortgages. Here expert advice for all parties involved is particularly crucial.

7. When they are ready help them find the best deal for them

When your staff are ready to buy they will likely want to move quickly and need experts to help. They will want access to a wide variety of lenders and products to ensure they find the perfect fit for their needs, as well as guidance to help them through the process of making an offer, through to getting hold of their keys. Providing such advice to them in their place of work and at no charge will not only improve goodwill between employer and employee, but also mean minimum distraction from their work.

This article is provided by Charles Cameron & Associates.

Charles Cameron & Associates is sponsoring REBA’s Innovation Day 2019. Join us on 28 November in central London to future-proof your reward and benefits strategy.

In partnership with Charles Cameron & Associates

Charles Cameron & Associates is a fully independent, whole of market Mortgage Brokerage.

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