WWYD? inheritance, getting a genuinely independent financial adviser.

[Answersonpostcard]

I'm trying to find genuinely independent financial advice: ie from someone who isn't tied to a mortgage in some way and doesn't have an incentive to sell me one.

Context is I've come into some money and looking for unbiased advice about how to manage this with respect to mortgages and property. I have spoken to a financial adviser who seems sensible and works for a big legitimate firm but he seems to be trying to persuade me to take on as many mortgages as possible.

Where do you go about finding a totally independent financial adviser? One who knows about the mortgage market and financial planning but doesn't stand to make any money out of recommending or setting up a particular mortgage? Happy to pay for this if its genuinely impartial.

Are they an FA or an IFA?

@Chewbecca

I actually don’t know. It’s a major national financial adviser firm but this isn’t clear from their website.

An IFA is one who isn’t tied to a bank/.pension/ mortgage company right?

He seems v professional etc and I have no reason to think he is dodgy but he seems to think me increasing borrowing against an existing property (as opposed to paying my mortgage off) is a good idea.

Either I am missing something or he’s looking for a fee…

You want an IFA. If you don't want commission based recommendations then you need to seek a fee charging service. Somewhere like St James's Place?

SJP aren't IFAs. Avoid them like the plague.

Stay away from SJP.

😂😂😂😂😂

Check out vouchedfor.co.uk for a local IFA.

Whereabouts are you? I can recommend the chap I use.

Yeah, don't go to SJP! I would stay away from any big firms, and go for a smaller, independent IFA. Companies like SJP and True Potential tend to concentrate on buying up smaller firms and are more interested in their profit margins than in doing the right thing for their customers. They won't steal your money, but you are not their priority.

Truthfully? I wouldn’t. I would use sites such as Money Saving Expert and Mumsnet and read and research myself and also ask for advice. You will get a complete range of advice - some of which will be rubbish - but with a bit of research you should be able to work out what is reasonable and what isn’t.

Financial advisers have their place - but in view you need to know exactly what you want from them before you go. And be very aware of how they are paid.

A lot of people will say things like “mortgage rates are still low at the moment - you are better investing in property or with a stocks and shares ISA”. And from a numbers point of view that is likely to be true. But that doesn’t allow for the level of stress that being a landlord may cause you. Or watching your stocks and shares ISA go down in value.

It also doesn’t allow for the fact that having no mortgage takes away a lot of stress for you. It makes you feel safe and secure. And - in my view - that is something worth paying for.

I’m confused - if you’ve just inherited money, why are you looking at mortgages? How much did you inherit???

And why is he trying to get you to take on numerous mortgages?

Thanks all, very helpful. It's not SJP but its of a similar size.

@UrsulaPandress yes please, with DM you.

@Soontobe60 to cut a long story short: I want to buy somewhere bigger in the same area where I currently live. Dilemma is whether to sell my existing property to pay for this to add to the lump sum I have inherited (which is in the order of about £250k) or hang onto my existing property. My preference would be to hang onto my existing property to rent out and have as an income stream in retirement, plus to leave as inheritance to my DD. Although obviously this would limit what I can borrow.

I'm inclined to use a chunk of the inheritance to pay off my existing mortgage (about £160k) which would leave me mortgage free and then use the remainder of the cash as a down-payment on a bigger place.

But the FA is recommending a go for a buy-to-let (or technically a consent to let) on my existing place and then a separate mortgage on a new property. I can't see the financial logic to this and I assume he's recommending it because he wants the commission, but maybe I'm missing something.

You would have to change your current mortgage to a buy to let one if renting it out. There may be tax advantages to what your advisor is suggesting. You may want a tax adviser.
Whichever, you must understand why they are recommending whatever it is they are - and how it compares to the alternative (paying off your current mortgage). There is no tax relief on a buy to let mortgage (though you can offset it against rental income). Many buy to let mortgages are interest only too.
Perhaps a mortgage advisor IS what you need?

@Mumoftwoinprimary gives good advice.

IFAs are really only useful if you have very complex financial affairs or want/need to buy a product.

Buy to let/becoming a landlord is not the cash cow it once was and you need to be prepared for the overheads - tax, insurance, complying with regulations, managing void periods (which incidentally would be much easier without a mortgage on the property). There are many Internet forums but probably the MSE one is a good place to start to help you to decide.

If you decide to do this, and you need a mortgage then advice might be worth it as advisers can get access to different products from lenders that might suit you better. Always worth doing your own research too to see what you can get (ie so you know whether the cost of the advice is worth it).

There is nothing to stop you from paying off your mortgage, renting your house out and using the remaining inheritance as your deposit on your next house. Then when/if you are sure the life of a landlord is for you, you can take out a BTL mortgage on the rental and use the sum raised to pay down your own mortgage - or other purposes such as buying another BTL!

Interest rates on personal mortgages tend to be lower than btl, but there is still some tax relief on mortgage payments, I believe.

You might be best finding a Facebook or similar group for btl, and see what the suggestions are from there.

OK, cross posts. Take Mondays line about offsetting mortgage against rental above my "some tax relief" thoughts.

This might be good advice. Depends on what interest rate you're paying on your current mortgage, how much permission to rent will cost you and what difference in having the full amount as downpayment on the new property would make to interest rates on the mortgage on the new property. I wouldn't immediately assume the financial advisor is in it for the commission.

For example, if you're currently in a decent fixed or variable rate mortgage on existing property that had a while to go, and changing to BTL is a relatively small fee with no or minimal increase in interest rate, reducing the loan to borrowing ratio on the new property (by putting more of your inheritance down) may lead to a lower interest rate on that property. Alternative is one mortgage just on the new property but at a higher rate.

The above may not apply to you but it easily could. Has the advisor looked at rates available?

Agree with the points above on whether buy to let is a good idea at all of course. Just commenting on whether the two mortgage thing is because the advisor is biased.

IFAs should be charging fees rather than taking commission.

With interest rates still so low, it makes no sense to pay off your mortgage, because the interest you are paying on your mortgage is less money than the profit you could make investing that money elsewhere. We can afford to pay off our mortgage but we have the money in investment funds instead and will buy a consent to let property soon.

Your financial advisor is correct. But by all means make up your own ideas if that’s your preference, doesn’t matter to me or indeed the advisor.

@Firty

With interest rates still so low, it makes no sense to pay off your mortgage, because the interest you are paying on your mortgage is less money than the profit you could make investing that money elsewhere. We can afford to pay off our mortgage but we have the money in investment funds instead and will buy a consent to let property soon.

Thanks, this is a really good point.

I've spoken to my mortgage lender and the consent to let mortgage is straightforward and it shouldn't change the interest rate so there's no reason not to do this. I suppose psychologically I was attracted to the idea of no longer having a mortgage on this but that's probably not very rational or sophisticated.

The short term problem is that I'm not really ready to push the bottom on buying a bigger property and still need somewhere to live so if I went ahead with that I'd need to rent in the short term which would be expensive and throwing money away. But also if I am going to take on a new mortgage (to buy a second property) its probably better to do it now rather than wait until the BOE interest rate has gone through the roof.

BTW I wasn't being rude about the financial adviser, just trying to make sure all angles are covered.

Look for a certified financial planner.

You don't need a financial planner or even an IFA for a mortgage. All lenders pay a procurement fee and there is not really any difference from one lender to another. It is a percentage of the loan and it doesn't make a difference if it's one or five loans. All fees have to be disclosed so they are not secret! The fees are quite small (obviously the bigger the loan the higher the amount) and I know a fair few brokers now have to charge a broker fee on top as it would otherwise not be worthwhile. Certainly an IFA can earn much more from planning than arranging mortgages.
You do not get to offset your interest on a BTL anymore against your rental income. You now only get a 20% tax credit which means only basic rate taxpayers and non tax payers have no further tax to pay on mortgage interest.