Valentine’s day is here, the festival of heart shaped boxes of chocolates, cheesy greeting cards, stuffed toys, bouquets of roses and, of course, romance.
With all the love in the air, we look the romantic side of personal finance; opening a joint account, how to pay for an engagement ring, borrowing to have a big wedding and what you need to know about applying for a mortgage together.
Should you join your accounts?
Joining together your current and credit card accounts, whilst not the most romantic part of a relationship, is strong sign of commitment as well as being a useful way to manage the household finances.
But before you rush into sharing an account you should check your credit reports and scores, as if one of you has a terrible credit history there is a chance that joining your finances could damage the score of the other partner.
It also goes without saying that having a joint account is a big commitment and requires a great deal of trust between both parties that the money will be handled responsibly.
How to spread the cost of an engagement ring
If the time has come to get down on one knee, but if you’re dreading the cost, a 0% credit card could help.
Ever since someone in a diamond company’s marketing department successfully set a tradition that engagement rings should contain a diamond and cost at least a month’s salary, proposing hasn’t come cheap.
Of course, money can’t buy you love, and many couples choose to ignore this “tradition”, or dust out a family heirloom to use as an engagement ring.
But, if you would like to treat your loved one to something special and get a new ring, you could spread the cost with 0% interest purchase card. With one of these cards you could pay no interest on new purchases for well over two years and, if you’re smart, effectively borrow for free.
To work out how much you’d need to pay, simply divide the cost of your ring by the number of months on the card’s 0% offer. For example, if you buy a £1200 ring with a credit card that has a 24 month 0% offer, and repaid £50 a month, you could avoid paying any interest whatsoever.
These cards can be useful for spreading the costs of all kinds of expensive one off purchases, so whilst on the topic of relationships think honeymoons, furniture for your first home, or wedding venue hire to name a few.
Borrowing to pay for a wedding
Traditionally the bride’s family pay for a wedding, but this tradition has become fairly outdated with many couples covering the costs of the ceremony and reception themselves.
However with a typical wedding bill coming in at tens of thousands they can be an expensive business and not everyone has the spare cash to pay for everything upfront.
So if you need to borrow a large sum of cash to pay for a wedding, a personal loan is one of the cheapest ways to borrow money. You can borrow up to a maximum of £35,000, but most of the lowest rates are available on amounts between £7,500 and £20,000.
Just bear in mind with a personal loan you must meet the fixed repayments for the duration of the loan term, which is typically up to five years. The shorter your loan term, the higher your repayments will be, but you’ll pay less interest overall.
A more flexible way to pay?
For a more a flexible way to borrow cash you could consider a money transfer card. Money transfer cards allow you to transfer your credit to your current account, you can then withdraw this cash to spend.
Often money transfer credit cards include a 0% interest period where you can avoid paying any interest charges on your debts for a few years. But note that to transfer the money you will need to pay an upfront transfer fee, which will typically be around 2-4%.
Unlike loan repayments, credit card repayments are flexible (above the minimum repayment, which is typically around 1-2% of the remaining balance plus any interest owed), so you can repay more or less depending on your situation, but you should aim to fully repay the balance before the 0% offer expires.
Applying for a mortgage together
Pooling your income with a partner is a tried and tested way to boost the size of mortgage you can apply for.
Traditionally the size of a mortgage is decided by applying a multiplier to income, for example if you earned £25,000 a year, a lender might multiply this figure by four (it’s rare to multiply income by more than five) to arrive at a mortgage offer of £100,000.
If your household has two incomes these are be typically be combined together in one of two ways.
- Add the lowest income on top of the highest after it has been multiplied. So if the highest income was £30,000 and the lowest was £20,000, the offer could be £140,000 (£30,000 x 4 + £20,000 = £140,000).
- Add both incomes together and use a lower multiplier figure. So for the same incomes this could result in an offer of £150,000 (£30,000 + £20,000 x 3 = £150,000).
Lenders tend to use whichever method results in the higher figure.