Mortgage: The first-time buyers' guide

Mortgage: The first-time buyers' guide

Is it possible to borrow more than the value of the home to cover fees?

No. In February the last of the super-sized mortgages disappeared. Coventry building society withdrew its 125% deal and was closely followed by Alliance & Leicester, Abbey, Northern Rock and Birmingham Midshires. Mortgages of more than 100% loan to value (LTV) are now a thing of the past.

I can't raise a deposit - can I still get a mortgage?

Just about. But a softening housing market and growing caution among lenders is causing 100% mortgages to slowly disappear too. According to recent research from online mortgage service mform.co.uk, there are now just nine lenders, including NatWest and Abbey, still offering 100% mortgages. This compares with 22, six months ago.

And even if you can get one, it is worth taking time to consider if it's the right move. Mform's marketing manager, Francis Ghiloni, warns: "With house prices falling there is a real risk of negative equity now for anyone taking a 100% mortgage."

I have a sizable deposit from my parents. Does this mean I won't be affected?

It depends what you mean by "sizeable". In recent years, having 5% of the property value saved to put down as a deposit would be enough to secure a competitive mortgage. But increasingly 10% is becoming the "magic number", says Ray Boulger, technical manager at broker, John Charcol.

"As a ballpark figure, rates are around 6.5% if you have a 5% deposit and 5.75% if you can raise 10%," he says.

"But, crucially, most lenders also charge a higher lending fee at 95% LTV or above, which makes the mortgages more costly still."

Some lenders, such as Cheltenham & Gloucester and Accord Mortgages - which is owned by Yorkshire building society - have abandoned 95% lending altogether, insisting that first-timers put down a 10% deposit.

And mortgage giant Halifax no longer offers 97% lending, having reduced maximum borrowing to 95%.

This is a real problem for first-time buyers, says Rob Clifford, managing director at broker, Mortgageforce. "Despite some recent small falls in house prices - by 0.3% in February, according to Halifax - the affordability gap is no less prevalent than it was three to five years ago.

This means around a third of the first-time buyers we see still require mortgages of more than 90% - yet there is much less availability."

I have a bad credit history. Have I scuppered my chances of a getting a mortgage?

Bad credit mortgages - otherwise known as adverse credit or subprime - are a big part of the cause of the crunch, so lenders are treading especially carefully around this area.

However, if you have between 10% and 15% to put down as a deposit and your credit problems are minor, getting a mortgage is by no means a lost cause, says Andrew Montlake, partner at broker, Cobalt Capital.

"The crunch may be on but lenders are realistic and one-off issues that occurred in the throes of a mis-spent youth can sometimes be overlooked by underwriters," he says.

"This is of course if the applicant is now stable and in a steady job."

You may still pay a premium on your rate though of up to 1%. And if your credit record is even slightly worse, you could have difficulty finding an affordable mortgage at all.

Will lenders be more concerned about the type of property I am buying?

Certain properties, like flats above shops or those with unusual or historic features, have traditionally been bugbears of lenders trying to ensure their loans are secured against a structure that is safe from harm and will hold its value. But, now a different type of home has joined this risk list: new-build apartments.

There has been a considerable oversupply of new-build flats recently, which is forcing prices of these homes to fall quicker than other property types. Subsequently, lenders are pulling in their horns on these mortgages, says Richard Morea, technical manager at broker London & Country.

"Abbey recently restricted its maximum LTV on new-build homes to 85%. For new-build flats it reduced it down further to 75%," he says.

"The bank claims these types of homes are twice as likely to be repossessed."

Where first-timers should be especially on their guard is when it comes to developers' incentives such as gifted deposits or promises of "no mortgage to pay for a year."

Often this is just a tactic to inflate prices and lenders are wising up to this fact. Most lenders are now discounting any incentive and calculating loans solely on the price you are paying, says Morea.

Can I still consider buying with friends?

Yes. These schemes have not changed and are a good way of affording to get on the ladder. Britannia building society's share-to-buy scheme, for example, will allow up to four friends on one mortgage and lend a maximum of three times each income.

Are interest-only loans still allowed?

Yes, but you may have to jump through some new hoops. In the past, paying just the interest on the loan and worrying about paying for the capital at a later stage was one way of affording a home.

For example, on a £200,000 repayment mortgage priced at 6% and taken over 25 years, you would pay £1,289 a month, compared to £1,000 when paying just the interest.

But lenders have become more vigilant about checking that you have a repayment vehicle set up - such as a pension or Isa - in which to start saving to repay the capital.

Even if you do have one, the lender can't be completely sure you save regularly into it, which is why some, like Abbey, are reducing LTVs on interest-only loans to a maximum of 90%.

Will the government help me?

The fact that lenders are battening down the hatches is not the fault of first-time buyers who generally pay their mortgages on time - it's to do with liquidity problems in the wider international markets.

"This means there is a strong feeling that the government should be helping," says Mortgageforce's Rob Clifford.

But the chancellor offered little help for first-time buyers in last week's budget. He did amend its current shared equity scheme, open market homebuy, to enable the buyer to qualify for 50%, as opposed to 75% of the property value, but this will only aid a small number of first-time buyers.

As a first-time buyer, am I worse off than people already on the ladder and remortgaging?

Not really. The three-month Libor rate, which is the crucial rate at which banks lend to each other and by which many mortgages are priced, went up this week to almost 6%. This makes mortgages more expensive for everyone with less than a 50% deposit, says Ray Boulger.

Tougher lending requirements are hitting everyone too. And, perversely, at least first-timers can take advantage of cheaper homes arising from distressed sales, where the homeowner can no longer afford to pay their mortgage.

Source: Guardian

Endowment Mortgages

Endowment Mortgages
by Jame Smith

What Is An Endowment Mortgage?

An endowment mortgage, in theory, is supposed to lower your mortgage payment. Ideally, endowment mortgages are much cheaper than standard mortgage policies such as repayment mortgages. When you get an endowment mortgage, you pay only the interest on the amount borrowed. In addition to this, you pay an addition small sum into a policy that is supposed to be ever-increasing: the endowment policy. This policy is supposed to grow and grow, and at the end of the mortgage term you use this money to pay off your capital.

“The customer pays only the interest on the capital borrowed, thus saving money with respect to an ordinary repayment loan; the borrower instead makes payments to an endowment policy. The objective is that the investment made through the endowment policy will be sufficient to repay the mortgage at the end of the term and possibly create a cash surplus.” - Endowment Mortgages, Wikipedia, June 2006

Endowment mortgage is actually not a legal term. This type of mortgage policy was popular in the 1980s, especially in the UK, but natural fiscal problems and stock market lows made many of these policies practically worthless. An endowment mortgage is always going to be hit or miss. When they work, they really work well. When they don’t work…then, things aren’t so great.

“With an endowment mortgage, the borrower only pays the monthly interest to the lender while investing an additional monthly sum into a policy that is usually invested in equities. The theory is that this "endowment policy" should grow sufficiently, with long-term share price rises, over the course of the mortgage (usually 25 years) that the capital debt can be repaid at the end of the term.” - Q & A: Endowment Mortgages, Business Times Online, June 2006

And If Things Go Wrong With My Endowment Mortgage? “With an endowment policy, you lay yourself open to the vagaries of the stock market and the competence of the policy manger. You must also closely monitor the performance of your policy to make sure you are contributing enough.” - Q & A: Endowment Mortgages, Business Times Online, June 2006

Let’s say, for instance, that you get an endowment mortgage. This type of mortgage has been getting more and more attention recently, and some consumers are starting to think it might just be a good idea again. So you get an endowment mortgage and start paying off your interest regularly. With equal regularity, you deposit a certain amount of dollars into your endowment policy. Only, the stock market doesn’t do so well. Stocks are low, the economy takes a plunge. Twenty-five years go by, and you discover that your endowment policy does not have enough in it to pay off your capital. All your interest has been paid, quite nicely, for two and a half decades, however. So, what about that capital loan that needs to be paid off?

You’d better find a way to pay it off… somehow.

“The underlying premise with endowment policies being used to repay a mortgage is that the rate of growth of the investment will exceed the rate of interest charged on the loan. Towards the end of the 1980s when endowment mortgage selling was at its peak, the anticipated growth rate for endowments policies was high (7-12% per annum). By the middle of the 1990s the change in the economy towards lower inflation made the assumptions of a few years ago looks optimistic.” - Endowment Mortgages, Wikipedia, June 2006

“When you took out your mortgage with an endowment policy, the aim was that the policy would grow in value. However, as the value of most policies is linked to the performance of the stock market there is usually no guarantee that the policy value will be sufficient to repay the mortgage at the end of the mortgage term.” - Consumer Information, FSA, June 2006

Types of UK Mortgages: A Guide Through The Maze

Types of UK Mortgages: A Guide Through The Maze
by Nicholas Marr

You may be wasting your money with the wrong type of mortgage. Knowledge is power.

There are essentially two different types of mortgage:

Repayment only, (capital and interest mortgage)

Interest only, (ISA, pension or endowment mortgage)

Repayment only

Your monthly repayments consist of repaying the capital amount borrowed together with accrued interest. On your mortgage statement, normally received annually, you will see that the amount borrowed decreases throughout the term.

Advantages

At the end of the term, you are safe in the knowledge that the total amount of the debt has been repaid.

Overpayments and lump sum payments into your mortgage account can be made reducing both the interest and capital amounts repayable.

Life assurance cover is not always necessary in taking out this type of mortgage.

Disadvantages

There may be financial penalties for making lump sum/overpayments into your mortgage account.

In the early years of a repayment mortgage the majority of the monthly repayment is interest rather than capital. For borrowers moving house regularly, this can result in little of the capital being paid off.

If you have no life assurance cover in place and die before the loan is repaid, the mortgage will still need to be repaid. This may result in the property having to be sold to repay the debt owed.

Interest only

With this type of mortgage, only the interest is paid off with each mortgage payment. The borrower also takes out at the same time, an alternative ‘repayment vehicle’ (method of paying off the mortgage) such as an ISA, pension plan or endowment policy. More information about endowments (which in the 1980’s and 1990’s were extremely popular), ISAs and Pension plans are below. The most important fact about an interest only mortgage is that the monthly repayments do not repay any of the outstanding capital balance. As a consequence it is important that the payments are maintained into the repayment vehicle otherwise it will not be possible to pay off the mortgage at the end of the term.

Endowment

The most common type of interest only mortgage which also provides life assurance cover and a fixed payment for investment. The fixed payments are based on the amount of the loan together with the mortgage term and are designed so that, at maturity, the amount invested and earnings are sufficient to pay off the mortgage. Much maligned in the press because of the poorer investment growth rates achieved in a low inflationary environment this form of investment is less popular these days. Note there is no guarantee that, when the endowment matures and ‘pays out’, the balance will be sufficient to repay the mortgage.

ISA Plan

The Individual Savings Account (ISA) is a tax free method of saving. Using an ISA as a repayment vehicle is growing in popularity but due to the ISAs complexity it is only for the financially sophisticated or borrowers taking advice from a suitably qualified financial adviser.

Pension Plan

Life assurance cover is provided and monthly payments are made into a pension fund. When the benefits are eventually taken, the mortgage is repaid using tax-free cash from the remainder of the fund. The plan holder can then draw a pension from the balance of the fund. This product, which tends to be used by the self employed, is only for those taking advice from a suitably qualified financial adviser.

Discounted mortgages

Most of the discounted rates offer discounts over the first one, two three, four or five years. The total amount of discount on offer tends to work out approximately the same over the period of the discount. The choice is yours between making a choice between a large discount for a short period of time, a small discount over a long period of time or something in between. For example one product may offer a 3% discount over 2 years and another a 2% discount over 3 years. The total discount you receive in either case is 6% so the choice you are faced with is what period to take the discount over.

Cash back mortgages

These deals vary but, as the name suggests, you get cash –as well as the money you're going to be borrow for your home. You may use it to pay for home improvements moving costs and furniture etc.

Cash back deals are perhaps best seen as an incentive to go with a particular lender. It’s rarely a genuine gift and you will find that you have extended ties. There is nothing free in the mortgage market the lender will eventually make more than make their money back.

Current account mortgages

It’s becoming increasingly popular to combine a mortgage and a current (banking & cheque) account. Its good news if you like the option of making overpayments on your mortgage (e.g. if you are self-employed or receive bonus payments). The other advantage is that interest is calculated on a daily basis, so when you pay money into your account, like your monthly wage, the overall loan size is lowered, so reducing the total amount of interest paid.

Base Rate Tracker Mortgage

These can get very complicated but in theory they're simply a mortgage that follows the Bank of England base rate at an agreed rate.

So you might have a Base Rate Tracker Mortgage which sets your mortgage at 1% above the base rate for, say, the first two years.

Non standard mortgages

If you have experienced financial difficulty in the past or are unable to produce full proof of your income then you may find that the main stream lenders are unable to help you. However, we would recommend that you contact these lenders first as, depending on the severity of your situation; you may find that they are willing to help. If not, however, you will find that there are lenders who specialise in this area of the market. These lenders tend to charge higher interest rates or require larger deposits. Once you have re established your credit you can change to a standard mortgage.

Remortgage

You don't have to move home to move your mortgage. Many homeowners move their mortgage to a different lender to save money, or switch to a different mortgage with their current lender.

You may want to remortgage to improve your home.

Save money If you're paying your lender's standard variable rate (SVR), your existing lender - or another lender - may offer better rates if you move to a different mortgage.

Raise money if you want to improve your home, or pay off other borrowings, you may be able to increase your mortgage rather than taking out a separate loan.

A Good Method To Get The Very Best Endowment Mortgage

A Good Method To Get The Very Best Endowment Mortgage
by Tom Allen

For many people getting the ideal endowment mortgage can be the cause of a huge worry. But the reality is organizing the absolute best endowment mortgage is not nearly as significant a headache as can be suggested when confronted with it for the first time.

Any good or bad points on your credit report will have a huge effect on the type of mortgage deal available to you. If it's ever happened that you have run into any headaches with regard to your credit rating you should really try to fix that as now would be the ideal time to fix up any previous headaches with the official history of your credit.

Because of the financial product advertising that you will read on the World Wide Web it's not difficult to arrive at the idea that almost all of the financial businesses are offering virtually indistinguishable products. But thinking this would be an error as this is absolutely not how things actually are and the truth is that almost all of the institutions and brokers deliver products that will have radically different rules and stipulations

One of the basics that you really ought to keep in mind is what is beyond the highlighted interest rate. In the years ahead the starting interest-rate will become a lot less important than it seems to be right now and it is quite important for your long-term financial health and well-being that you have become part of a deal that contains good terms and conditions. Ultimately, the terms and conditions are the thing that you really ought to be paying attention to.

The companies who provide personal-finance have grown more predisposed towards pushing the concept that there's absolutely no room for negotiating in the various products they have available. This is certainly not the way things are and a significant percentage of people could be able to save some money if they just made use of the room for negotiating that's there in products of this type. Lots of people find the finance product marketing information to be quite difficult to decipher and considering the style of the technical speak that is generally presented under these conditions, I can certainly recognize how this can be possible but it's very important to take advantage of that scope for negotiation to make some real savings.

The business of personal finance has increasingly become more complicated during the last number of years and quite a lot of consumers find a lot of the advertising of financial products to be quite difficult to decipher and given the nature of the technical speak that is often presented in this context, I thoroughly understand how this can be regularity the case.

Once it has become a necessity to get an excellent endowment mortgage, do a little legwork and research because the Internet is an abundant supply of very helpful data when you need to get the best possible endowment mortgage.

To sum up, you hope to be frugal with your endowment mortgage. There are big numbers here and as a by-product the slightest movement in a percentage point will furnish you with large savings.

Endowment Mortgage Loan: The Benefits And Pitfalls

Endowment Mortgage Loan: The Benefits And Pitfalls
by Peter Kenny

Endowment mortgage loans are one of the most controversial types of loans, and have received good and bad press in equal measure. If you are looking for a mortgage loan, then you should look at an endowment mortgage loan as one option. Despite these loans being quite popular, they can be complex to understand. If you want to know more about the benefits and pitfalls of an endowment loan, then here are some useful tips to help you.

What are endowment loans?

Endowment loans are a type of mortgage that comprises of two parts. The first part is an interest-only mortgage loan that works like any other mortgage of this type. However, combined with this is an endowment policy that you set up and mature in order to pay off the mortgage at the end of the loan term. The policy is set up to grow enough to pay off the amount you borrow.

Benefits of an endowment loan

The major advantage of an endowment loan is that you have very low monthly payments, like you would have for an interest-only loan. However, there is an added bonus in that you are investing in a savings policy that will pay off your mortgage loan. This means you are saving on your monthly payments as well as spending your money wisely by investing in a policy to pay off your mortgage. This can reduce the cost of your mortgage loan whilst still keeping your payments low.

Pitfalls of an endowment loan

As well as benefits there are also pitfalls to an endowment loan. Although the interest-only loan will reduce your monthly payments, paying off only the interest means you are paying money without reducing your debt in any way. And you are still paying money into an investment fund so your monthly payments are more than just the interest. Also, the investment fund is designed to pay off the mortgage loan in full, but this is by no means guaranteed. Many people are finding themselves in a situation where there is a shortfall in the policy and they are unable to pay off the mortgage in full.

Endowment vs repayment loan

The major alternative to an endowment loan is the traditional repayment loan, where you pay off the loan and interest each month until the entire amount is repaid. These types of loan carry higher monthly payments, and are a safer option than endowment loans. However, during times when inflation is increasing an endowment loan is a good idea, as the risk is reduced and you can benefit from lower payments each month. The key as to whether an endowment policy is right for you depends on the current market and how willing you are to risk the policy falling short of the full loan repayment amount.

Mortgage Endowment: Cash In or Continue?

Mortgage Endowment: Cash In or Continue?
by Ray Prince

Many new clients we meet have one or two unitised with profits endowments in their investment portfolio. Whilst some have decided that there may be better alternatives available for their money after years of falling returns (and questionable prospects), many are hanging on in the belief that things could take a turn for the better.

If you have one or more of these plans, what SHOULD you do?

Indeed, what CAN you do could be one of your main questions.

The reality is that the annual returns on 'unitised' with profits investments have been falling for the last 9 years.

NOTE: There are other types of endowment policies including Full Cost Guaranteed, Traditional With Profits and Unit-Linked plans. This article does NOT apply to these plans.

The way in which the unitised with profits plans work is that when your monthly premium is received by the insurance company, a percentage pays for charges and the remainder is split between paying for the life assurance/critical illness insurance and the actual investment.

The investment portion is split between:

• shares
  
• property
  
• bonds
  
• cash
  

With profits funds were designed to 'smooth out' the returns of the stockmarket. In years of good returns the insurance company would retain a portion of the profit and pay an annual bonus to your plan.

In years of poor returns the theory is that they would dip into their reserves and pay an annual bonus. Once these bonuses have been paid they cannot be removed.

If the insurance company you have your plan with is not financially strong, it's likely that they will be investing a higher proportion of your money in fixed interest (bonds) and cash, restricting potential future growth. Over the last 10 years many companies have been increasingly moving the money in their with profits funds towards bonds and cash.

So if the returns on your plan have been falling every year, and more of the money has moved OUT of shares, you don't have to be a genius to work out that future prospects may not be great.

If the company you are with is financially strong, you'll be ok, surely?

Maybe not.

Norwich Union is a strong with profits office and they have 43% of the money in their with profits fund invested in shares. Even so, the company predict that only one in ten of their 750,000 endowment policyholders will receive the original target sum at the end of the policy term.

The fund actually returned 10.7% in 2006. Even so, the company has REDUCED payouts on many plans that matured in 2006. They will be further reduced in 2007 by many companies.

Let's look at some actual payouts for a male aged 29, investing £50 pm over 25 years.

In 1988, Norwich Union paid out £100,247. Not bad for a total investment of £15,000.

By 2006 this figure had fallen to £45,338. In 2007 the figure is £42,133.

If you are with a financially weak provider, such as Scottish mutual and NPI, the situation could be even worse.

The Future

So what options do you have?

Whilst there is no simple answer, as every situation is different, you can:

• continue with the plan and receive the proceeds when it matures
  
• stop investing into the plan and receive the proceeds when it matures (and perhaps invest the money elsewhere or pay down your mortgage)
  
• cash in/surrender the plan and invest/pay down
  

There are pros and cons to all these (such as the loss of life cover) so you really do need to do your research before you take any action.

The Financial Tips Bottom Line

If you do have an endowment plan, please don't make the mistake of buying your head in the sand and ignoring the facts. For example, if you're paying £100 pm into a plan with 8 years to run, you'll be handing the insurance company £9,600.

Find out what the best option is for YOU, and have the peace of mind that you've made the right decision.

Ray Prince is an Independent Financial Planner with Rutherford Wilkinson plc, and helps UK Resident Doctors and Dentists get the best deals on mortgages, protection and investments, as well as helping them achieve their financial objectives.

Endowment Policy - Another Forgotten Option

Endowment Policy - Another Forgotten Option
by Michael Challiner

These complicated financial products combine life insurance and investment growth in one package. They were most commonly used as a way of repaying a mortgage and were most popular with homebuyers in the eighties and nineties.

The reason so many people bought them was because home loan firms and middlemen such as estate agents earned large commissions for selling. The charges tend to be 'front-loaded' meaning most of it is paid up front and therefore, for several years you will receive little if anything back if you have to stop paying the premiums.

In theory, these policies can grow to more than you need to repay your mortgage, giving you a bonus to spend on anything you like. In practice, this has rarely happened in recent years and of the 8.5 million endowments in 2004, 6.8 million were not expected to clear the mortgage they were originally intended to pay off.

With an endowment mortgage, you do not repay any of the capital you borrow during the term of the loan. Alternatively, the endowment policy should grow to produce a lump sum which is large enough to repay the loan in full at the end of the pre-agreed period of, normally, 25 years.

The monthly payments consist of interest on your mortgage loan and the premium for the endowment. Within the package you also pay for life insurance which will repay the loan should you die. However, there is no guarantee your endowment will pay off your mortgage.

When the time comes to making a decision on stopping an endowment and surrendering it, it is important to check your policy and make sure there is some value in doing so.

Early redemption can result in making less than you would have if it carried on for its full term. However, if you need the money, this could be our only solution.

Continuing to pay money into a poorly performing investment could be throwing away hard earned cash.

As well as surrendering it back to the company from whom it was bought from, policyholders also have the option of selling to a third party.

This can also have the added benefit of getting more for your policy than you would if it were sold back to the original issuer.

Different companies will have different requirements when it comes to them buying your endowment.

Usually they would require it to be with-profits or a with-profits whole life policy and have been running for a minimum number of years (the number of depending on the company).

Some will also require a surrender value of at least £1,500. If your policy does not meet the criteria, they will not be able to handle your sale. This would mean the only other option available is what the policy issuer will offer.

The Association of Policy Market Makers (APMM) is the industry body for firms specialising in the buying and selling of endowments. An independent financial advisor could also be helpful in comparing offers and helping you get the most for your policy.

There will be a fee for the work, but it could save you time and energy and also help you achieve the best possible price.

Don’t forget how important your endowment policy is. Like with an investment, you should not suddenly cancel the policy without doing the appropriate research and taking the adequate financial advice.

If you stop payments on a policy, you may lose any life assurance cover that was offered to you. This is an important consideration for your dependents if you are then taken ill or were to die without having set up an alternative method of paying off the policy.

On average around half of the total payout on an endowment if you don’t sell will come on the very last day. This is the so-called terminal bonus and it is not guaranteed. Stop paying in before then and you are likely to lose this. Instead, you will get the benefit of only the annual bonuses added to your policy.

The Best Way To Pay Off Your Mortgage

The Best Way To Pay Off Your Mortgage
by Chetan Bhardwa

There are many ways of paying off your mortgage, below are just a few examples of how to do it. So you want the finest mortgage deal possible. With so many available where do you start.

Understanding what deals have to offer is a key factor. A mortgage is simply a loan, secured on the value of a property, which must be paid back over a period of time. 'Secured' simplifies security for the lender, that if you do not pay back the promised amount your house could be repossessed to recover repayments. Normally, events rarely get this far, if you are having financial difficulties, discuss your problems with your lender.

A mortgage term is normally for 25 years, this can be decreased or increased, however it depends on your personal circumstances. The amount which you decide to borrow is called the capital, and there are different ways to pay this. Interest must be paid on the capital which you borrow.

Repayment
This way you can guarantee that the property will be yours at the end of the term. Towards the start of a mortgage deal you will be paying off mostly interest, so if you sell up in the early years you will find you have hardly paid off any of the mortgage capital. Through time, you will be bringing that repayment down rapidly. There are lenders which let you make over payments without getting any type of charges.

A repayment mortgage can be one of the safest way to carry out a mortgage deal.

Interest Only
Any repayments you make each month would be purely paying off your interest only to the lender. You won’t get a chance to pay off any of the capital. After paying monthly repayments on an interest only payment method, you would see large rewards only if your property value increased. With this type of mortgage deal there are high risks involved and is normally suitable for homeowners who are struggling financially.

Endowments
An endowment mortgage is a comparison of an interest-only mortgage. The endowment policy is a mixture of savings, investment and life assurance all tied in one insurance policy.

Endowments normally have high charges, another reason is that investment returns have decreased in recent years. Remember, if this happens with an interest only mortgage, you will need to increase the amount you pay into your investment fund. Endowments are inflexible, costly and unpopular investments which should not be chosen by anybody who are currently on the property ladder.