Endowment Mortgage: How To Organize The Best Contracts

Endowment Mortgage: How To Organize The Best Contracts
by Tom Allen

The credit report which will be based on your previous financial history will be a massive factor in determining what type of mortgage you will be able to acquire. If you have had any mishaps around your credit rating than before the commencement of any mortgage application would be a good time to put right any previous problems in terms of your credit record.

One fundamental thing that you should always try to keep in mind is that all the solid wisdom of what a solid mortgage deal is for the most part, will always stay the same. Therefore, you can see why you must not take too much notice of short-term trends.

When you need to research what's available in this specific area of the financial services business, it's extremely important to remember that most of the information that you will have come into contact with will more than likely have originally come from a commercial source and with this as part of the process, straightaway, you can see why it's absolutely vital to cross check your data across more than one site. By cross-referencing in this way from several different places you give yourself a great opportunity of acquiring solid info that will be of assistance to you when it comes to decide on what the next step should be.

When the need arises to organize a mortgage, the net and various web sites can be a fantastic resource in terms of getting in some background research and doing this research work will really leave you ideally positioned wants the time comes to sign a contract with any of the available providers. There are a number of reasons why doing research makes sense but, at its core, once your foundation work is good then you leave yourself on solid ground once the need arises to make a determination on which provider and deal is good for you.

The financial companies have become more dogged in the area of pushing the concept that there is no scope for negotiation in the products they have on offer. This is simply not accurate and a significant percentage of potential customers would actually be able to make some real savings if they were to utilize the room for negotiating that's there in these deals. Lots of people find the advertising that goes with financial products to be quite confusing and considering the nature of the lingo that is used in this type of material, I thoroughly comprehend how this can be likely but it's important to take advantage of that room to negotiate to save some money.

For many people getting the ideal endowment can be the source of a real problem but like many things organizing a good endowment is not as huge a difficulty as it can seem when you first encounter it.

In substance, you will wish to be frugal with your mortgage. There are serious numbers here and as a by-product even a microscopic movement in a percentage point could well deliver sizable savings.

Glossary: Mortgage Terms

Glossary: Mortgage Terms
by Jon James

Additional Security Fee
An Additional Security Fee (Mortgage Indemnity Guarantee policy) is the fee taken to get an insurance policy that will cover your lender so that if you default on payments, he will not suffer any loss. You have to pay the Additional Security Fee and the premium along with your mortgage advance. Although you are paying the premium, remember that this policy is for the protection of your lender and not for you.

Administration Fee
The administration fee is the amount charged by your lender to start working on the documentation part of your mortgage application. It includes the home valuation fee as well. The administration fee will not be refunded even if your valuation is not done or if your application has been rejected.

Adverse Credit
Adverse credit occurs when you have a history of bad credit, bankruptcy, CCJ's, or loan arrears. Adverse credit can also be called as bad credit, poor credit, or it can be said that you have a low credit score.

Agricultural Restriction
An agricultural restriction is a rule which will restrict you from holding a property if your occupation is in any way related to agriculture.

Annual Percentage Rate
The Annual Percentage Rate is the rate at which you borrow money from lender. It includes all the initial fees and ongoing costs that you will pay throughout the mortgage term. As the name suggests, annual percentage rate, or APR, is the cost of a mortgage quoted in a yearly rate. The annual percentage rate is a good way to compare the offers from different lenders based on the annual cost of each loan.

Apportionment
Apportionment, or sharing out, is a facility that allows you to divide the responsibility for utilities, property taxes, etc. with the buyer or the seller of the property when you are either selling or buying the property.

Arrears
Arrears happen when you default on your mortgage payment or any other type of debt payment. If you have arrears on the record of your current mortgage, you will face problems when you want to look at remortgaging or getting a new mortgage.

Arrangement Fee
An arrangement fee is the amount you have to pay your lender to access particular mortgage deals. While searching for a fixed rate, cash back, or discounted rate mortgage, you will pay this fee at the time that you submit your application, it must be added to the loan upon completion of the term, or it will be deducted from the loan on completion.

Assignment
An assignment is the document transferring the lease of the property or rights of ownership from a seller to a buyer. It may be an endowment policy to the building society in connection with a mortgage.

ASU
ASU is Accident, Sickness, and Unemployment insurance which covers your mortgage payments in case of an accident, a sickness, or involuntary unemployment.

Auction
An auction is the public sale of a property to the person who quotes highest bid. The highest bidder has to sign a binding contract that ensures that he do all valuations, searches, etc. before the sale of the property.

Authority to Inspect the Register
An authority to inspect the register document is a document fro the legal or registered owner of a property allowing the solicitor of the purchaser to get information concerning the property.

Banker's Draft
A banker's draft is a way to make a payment. In appearance, it is the same as a cheque, but in effect it is a cash payment. The money is given to the bank, and they issue a cheque that is certified to be good for the given amount.

Base Rate Tracker
Base rate tracker is a type of mortgage in which the interest rate is variable, but it is set at a premium (above) the Bank of England Base Rate for a period or for the full term of the mortgage. The best part about this type of mortgage is that it has little or no redemption penalty. This means that by making overpayments, you will be able to save money on interest by paying off your mortgage earlier than the agreed upon date on the initial mortgage contract.

Booking Fee
A booking fee or arrangement fee is charged when applying for a fixed or a capped rate loan. Booking fees are normally non-refundable if charged upfront, but sometimes the booking fee is added to your final mortgage payment.

Bridging Loan
A bridging loan is useful when you want to purchase a property, but your ability to do so is contingent upon the sale of your old property. This is a very short term loan that is paid off as soon as your old property sells. Speak with a loan advisor before taking out a bridging loan to be sure it's the best option for you.

Broker's Fee
A broker's fee is paid to your debt advisor or other intermediary that assists you in finding the best mortgage or loan deal for your circumstances. BSAThe BSA, or the Building Societies Association, is a group that works in the interest of member societies.

Building Societies Commission
The Building Societies Commission is a regulatory organization for Building Societies. This commission reports to the Treasury Ministers.

Building Society
A Building Society is a mutual organization that gives you money to buy or remortgage residential properties. This money comes from individual investors who are paid interest on their funds. A portion of building society funds is also raised through commercial money markets.

Buy-to-Let
When you purchase a property for the sole purpose of renting it out, you can apply for a buy-to-let mortgage. The payments for this type of mortgage are calculated based on your projected rental income instead of your personal income.

Capital and Interest
Your monthly mortgage payments consist of two parts: the interest and the capital. The interest payment is a payment on the interest balance of your loan. The capital payment is a payment on the amount that you borrowed.

Capital Raising
Capital raising generally means remortgaging for a higher amount than you need to pay off your existing mortgage in order to use the excess money for other personal financial uses.

Capped Rate
A capped interest rate is an interest rate that will not exceed the standard variable interest rate for a set period of time (from 1-5 years) that is decided by you and your lender. If the standard variable rate falls below your capped rate, your interest rate will decrease accordingly.

Cash Back
Cash back is the amount you receive when you take out a mortgage, the amount may be fixed or a percentage of your mortgage amount.

CCJ
CCJ stands for County Court Judgment. This is a decision reached by a county court against you when you have defaulted on your debt payments. If you clear the debt in question in a set amount of time, a satisfactory note will be put on your credit report to signify that the debt is taken care of.

Centralized Lender
A centralized lender is a mortgage lender that does not rely on a branch network for distribution. "Centralized lending" is now provided by several building societies. These societies operate separately from their branch networks, and they rely exclusively on mortgages from intermediary sources.

Charge
A charge is any interest on a mortgage to which a freehold or leasehold property can be held.

Charge Certificate
A charge certificate is a certificate issued by HM Land Registry to you with your name as the registered title for a given property. This certificate contains details of restrictions, mortgages, and other interests. It has three different parts: a charges register, a property register, and a proprietorship register. If there is no mortgage on the property, it is called a Land Certificate, and it is issued to the registered proprietor.

Chattels
Chattels are moveable items in your house such as furniture or your personal possessions.Chief RentChief rent is paid by the owner of a freehold property. This is the same as the ground rent that is paid by a leaseholder.

CML
Council of Mortgage Lenders

Completion
Completion is a term that explains that you have become the owner of your house after finishing the formalities of the sale and the purchase of the property.

Conditional Insurance
When you take out a fixed or discounted rate mortgage, your lender may try to persuade you to take out an insurance policy that will cover any missed payments due to an illness, an accident, or unemployment.

Contract
A contract is a legally binding sale agreement. There are two identical copies signed by both the buyer and the seller, and each party keeps a copy for their records. Once both parties have signed the contract, they are committed to the terms of the agreement.

Conveyance
A conveyance is the deed by which a freehold, unregistered title is transferred. The deed is called an assignment if your property is unregistered or leasehold. If the property is registered, the deed is called a transfer.

Conveyancing
Conveyancing is the legal process by which the buying and the selling of a property take place.

Covenant
A covenant is an assurance given in a deed.Credit ScoringCredit scoring is the procedure by which a lender evaluates your paying capacity before offering a loan or mortgage.

Credit Search
A credit search is done by a lender and a credit bureau to search your records for CCJs and other indicators of bad credit.

Debt Consolidation
Debt consolidation is the process by which you take out a loan or mortgage in order to pay off a number of high interest debts. By doing this, you will only need to make one payment each month, and you will save significantly on interest charges.

Deed
A deed is a legal document that denotes the owner of a given property. You can transfer a title to both freehold and leasehold with a deed.DepositA deposit is the amount of money you put down toward buying a property.

Disbursements
Disbursements are any amount you pay to solicitors against land registry fees, searches, faxes etc.

Discounted Rate
Discounted rates are used to attract new borrowers to lenders by setting the interest rate below the standard variable rate for a guaranteed period of time. If you repay the entire discounted rate mortgage within the first few years, your lender may charge you early redemption penalties.

Early Redemption Penalty
An early redemption penalty is charged by your lender if you do a part or full payment of your mortgage amount before the completion of your mortgage term. These penalties will also be charged if you decide to remortgage and move your mortgage to a new lender. Early redemption penalties mainly apply to fixed rate, discounted rate, and cash back mortgages.

Easement
Easement is the right held by one property owner to make use of the land of another for a limited purpose, like a right of passage.

Endowment Mortgage
An endowment mortgage is an interest only mortgage supported by an endowment policy. During the term of the mortgage you will pay only interest to the lender, and your premiums are alternately paid into an endowment policy which will mature over the term of your mortgage. The endowment policy is designed to pay off your mortgage as well as act as life insurance. However, you cannot depend on this amount to be sufficient to pay all of your debt.

Endowment
There are different types of endowments, but here an endowment is a life insurance policy that will pay off your interest only mortgage.EquityEquity is the amount of value in your home. It is the value of your home less the amount left to be repaid on your mortgage.

Equity Release
Equity release is a means of releasing money from the value of your home either in a lump sum or in monthly installments. This money may be used for home improvements, debt consolidation, or other large expenses.

Exchange of Contracts
Exchange of contracts occurs when the buyer and the seller of a property sign and swap the contracts which detail the property, the price, the date, and the terms of the arrangement. When the contracts are signed, they become legally binding, and legal action can be taken against anyone who breaks the contract.

Existing Liabilities
Existing liabilities are all financial commitments outside of your mortgage. Existing liabilities may include bank loans, credit card debt, maintenance payments, etc.

First Time Buyers (FTB or FTP)
A first time buyer is one who has never owned property before.

Fixed Rate
A fixed rate is when you pay a fixed amount of interest on a loan for a fixed period of time. Lenders provide fixed rate loans for short periods of time (three-six months) all the way up to 25 years. Early redemption penalties apply if you pay off the mortgage before the end of the fixed rate term. Flexible SchemeA flexible scheme is a new way of calculating mortgage interest charges. Lenders calculate interest on a daily basis instead of on an annual basis. The new interest rates will only affect the remaining balance of the mortgage. By making regular overpayments, you can repay the loan faster thereby saving a lot on interest charges.

Fixture
A fixture is an item attached to your property, and therefore it is legally part of the property.

Freehold
Freehold means that you have ownership of a property for an indefinite period of time. This is in contrast to leasehold which means that the property is only under your control for a limited period of time.

Further Advance
A further advance is an add-on loan to your existing mortgage from your existing lender. The money from a further advance may be used for home improvements, to purchase a freehold property, or for personal purposes such as debt consolidation.

Guarantor
A guarantor is a person who guarantees the lender that the borrower is eligible for a loan or mortgage. If the borrower fails to make payments, the guarantor will make them.

Gazumping
Gazumping occurs when a seller agrees to sell a property to one person, and they proceed to decline that offer in favor of a higher one.

Ground Rent
Ground rent is the amount which a leaseholder needs to pay to the freeholder each year.

Home Buyer's Report
A home buyer's report is made by a lender after a mortgage valuation has been done and before the full survey takes place in order to give the borrower a complete understanding of the property they are thinking of buying.

Income Multipliers
An income multiplier is a type of calculation that a lender will use to calculate the amount a borrower can receive. The most common income multiplier is three times a single income or two and a half times joint income. The lender will choose the one that yields the higher figure. Lenders are more flexible if your LTV ratio is low.

Income Protection Insurance
With income protection insurance, your monthly payments will be covered in the case of illness, accident, or unemployment.

Intermediary
An intermediary is a mediator who finds the best mortgage for you, and they also arrange the mortgage for you on your behalf.

Land Registry Fee
A land registry fee is paid when you want to register your ownership of a property or when you want to change the registered title of a property.LeaseholdUnlike freehold in which a property is owned, leasehold is when a property is owned, but the land that it's built on is not owned by the leaseholder. Their control of the property is only for a set number of years.

Licensed Conveyancer
A licensed conveyancer is like a solicitor in that they specialize in the legalities of buying and selling property.

Local Authority Search
A local authority search is made by the solicitor of the people that plan to buy your property. They check to make sure there are no planned developments on the property such as roads or buildings. They will check for any planning permissions or enforcement notices posted on your property.

LTV
LTV, or loan to value, is the percentage derived from dividing the value of your property by the amount of your mortgage. A low LTV is much less risky for lenders than a 100% LTV.

Loan Consolidation
Loan consolidation happens when a loan is taken out to repay another loan with a higher interest rate or to repay a number of high interest debts. Loan consolidation is often achieved through remortgaging.

MIG
A MIG, or mortgage indemnity guarantee, is insurance one takes out to cover their lender in the case that their property is repossessed, and the lender is unable to get their money back. A MIG is paid for upon completion of a mortgage.

MIRAS
MIRAS, or mortgage interest relief at source, was a tax relief given to those with mortgages, but this relief was abolished by the government in April of 2000.MortgageA mortgage is a loan that allows someone to buy a property. The property itself is the security for the loan.

Mortgagee
The mortgagee is the company or organization that finances your mortgage.

Mortgagor
The mortgagor is the person taking out the mortgage to buy a property.

MPPI
MPPI, or mortgage payment protection insurance, is insurance one takes out in the case of an accident, an illness, or involuntary unemployment that would render them incapable of making their monthly mortgage payment.

MRP
MRP, or mortgage repayment protection, is insurance taken out through your lender during the term of your loan.

Negative Equity
Negative equity occurs when the money you owe to your mortgage lender is greater than the value of your property. People find themselves in negative equity situations when they take out 100% LTV mortgages.

Overpayment
Overpayment happens when you pay more than the regular monthly payment on your mortgage so that the mortgage is repaid before the end of the mortgage term. With overpayments, you can save money on interest, but you may also be charged an early redemption penalty.Payment HolidayA payment holiday is a period during which you make no mortgagee payments. This is normally available with flexible mortgages only.

PEP
A PEP, or personal equity plan, allows you to own shares or unit trusts without paying any taxes.

Personal Pension
A personal pension provides for your financial needs after retirement. You make structured payments into your pension savings during your working years. Often, some of this money may be taken out to pay off your mortgage liabilities.

Portability
Portability is a term used to describe a mortgage that can be transferred between properties when you move from one house to another.

Redemption
Redemption is when you pay off your mortgage, when you remortgage, or when you move to a new house.

Remittance Fee
A remittance fee is charged by a lender for sending the amount of a mortgage to your solicitor.RemortgageA remortgage is a loan taken out from a new lender or a loan renegotiated with your existing lender to pay off your existing mortgage. This is done to decrease the interest rate you're paying or to raise extra capital.

Repayment Mortgages
A repayment mortgage is when part of your monthly payment goes toward the interest and another part of the payment goes toward the principal. This is also known as a capital and interest mortgage. If payments are made regularly, the entire sum of the loan will be repaid by the end of the term.

Retention
Retention is the amount that your lender keeps pending until certain conditions of your mortgage are met.

Repossession
Repossession is a legal process by which your mortgaged property comes under the control of your lender due to incomplete repayment. Your property may then be sold at public auction.

Right to Buy
Right to buy means that you are legally able to purchase the property at a discounted rate if you've been a tenant for a long enough period of time.

Sealing Fee
A sealing fee is an amount charged by your lender when you repay your mortgage.

Self Certification of Income
Self certification of income means that you confirm how much you earn, and the lender does not need proof of your income from a third party. Self certification is useful for self employed people or contract workers.

Shared Ownership
Shared ownership is a scheme devised by housing associations that requires you to pay mortgage payments on the part of a property that you own while you also make monthly rent payments on the portion of the property owned by the building association.

Solicitors
Solicitors are the people who give legal advice and carry out all the legal work for mortgage and remortgage transactions.Stamp Duty Stamp duty is a tax paid to the government on the purchase of a property.

SVR
The SVR, or standard variable rate, is the lender's own base rate. It is subject to change at any time depending on the lender. The SVR will fluctuate based on the Bank of England Base Rate.

Structural Survey
A structural survey is the thorough inspection of a property carried out by a professional surveyor.

Tenure
Tenure means the type of rights a person has over a property or the land it stands on. Tenure could be freehold or leasehold, for example.

Term
The term of a mortgage is the number of years over which you plan to pay your mortgage off.

Tie-in Period
A tie-in period is an amount of time for which you are bound to a lender. Tie-in periods often exist with special mortgage deals like fixed, capped, or discounted rates. If you move your mortgage to a different lender during this period, you are subject to an early redemption fee.

Title Deeds
A title deed is a legal document that validates the ownership of your property. A title deed proves your true and legal right to your property.

Transfer Deed
A transfer deed is a legal deed used for transferring the ownership of your property to a buyer.

Unencumbered
The term unencumbered means that you own your property outright with no mortgages or loans against it.

Valuation
A property valuation is a survey conducted on a property by a qualified surveyor in order to assess the value of the property. This valuation is done on behalf of your lender so that they are able to confirm the value of your property.

Variable Rate
A variable rate means that your interest rate may change from month to month thereby causing your payments to fluctuate monthly.

Vendor
A vendor is the person from whom you purchase a property.

Endowment Mortgage: What can you complain about?

Endowment Mortgage: What can you complain about?

You may have grounds for complaint if your adviser did not:

• tell you how your money would be invested and explain the risks involved;
  
• explain that an endowment policy is a long–term commitment that often gives a poor return if you cash it in early;
  
• check you were comfortable with the risks of your money being linked to investment performance, including the stockmarket;
  
• check there was a reasonable expectation you would be able to keep up payments until the end of the term; or
  
• explain any fees and charges and how they would affect the return on your savings. If you bought your endowment policy between 29 April 1988 and 31 December 1994, you should have been given ‘product particulars’. These are various details about your policy, including charges and surrender values for the first five years. If you bought your policy on or after 1 January 1995, you should have been given a key features document. This gives details of fees and charges and how they affect your savings over the longer term.
  

You may also be able to complain if:

• your endowment policy finishes after you retire and the adviser did not check that you were likely to be able to carry on paying the premiums after you retired;
  
• you were advised to cancel one endowment policy and take out another;
  
• your endowment policy runs on after your mortgage loan is due to finish; or
  
• you were given a guarantee that the endowment policy would pay off the mortgage loan (though this is likely to be rare).

Having Trouble Paying Your Mortgage?

Having Trouble Paying Your Mortgage?
by Joseph Kenny

Taking out a mortgage or a debt consolidation loan, should not be taken lightly. If you rent a home, you are a tenant, if you do not pay your rent., the landlord can evict you. If you own your own home, the company who holds the mortgage or loan can also evict you if you fail to make the payments. The big difference is of course that if you rent, and you are evicted you just have to find another place to rent.

If you are a homeowner, the consequences can be far more severe. You could loose your deposit that you originally put down on the house. As well as the lot of the equity that you have built up and a large part of any improvements like a new kitchen or extension that you have paid for.

Once you start down the repossession road with a mortgage holder that has a lien on your home. It can be incredibly difficult and expensive to avoid an impending repossession order. The best way to deal with this kind of circumstance is to not get yourself into that position in the first place. You need to stick to your agreement with the when the as best as you possibly can.

When taking out a mortgage or a debt consolidation loan you must seriously consider if you can afford the monthly repayments. You must not only consider if you can afford the payments now, but also, if the payments go up because of interest rate rises, will you still be able to pay what is owed each month?

A good mortgage broker will be able to calculate how much you will have to pay if the mortgage interest rate goes up by a certain amount. It is very important that you don't assume the mortgage payment will always be the same, in these difficult financial times. It is quite possible for your mortgage payments to increase considerably.

For example, if your income were £1000 per month, and you took out a mortgage that cost £500 per month. You will probably struggle to make those payments. When you took out your mortgage you wisely decided that £300 per month was what you could afford. Nevertheless, what happens if interest rates increase over two years, and raise your mortgage payments to £400 a month. Can you still make that payment comfortably? Or will it prove too much to handle? This is what can happen with mortgage payments, that is why you need your broker to calculate what the mortgage could possibly go up too, that way you can decide still be able for your monthly payments.

If you get into difficulties do not bury in your head in the sand, you must take action as soon as you feel you are getting into difficulty. There are some options available that could get you out of difficulty. You may consider changing your home loan to a different type of mortgage that may be more suitable for your changed circumstances.

An interest only mortgage can be a great to help you out for a long period of time. Perhaps several years, while your circumstances change. Interest only mortgages are considerably less expensive per month than regular mortgages.

Of course, you are not paying off any of the money that you owe, on the other hand, you are holding on to your home and everything that you put into it financially and otherwise. A few years from now the rates may go down and you may have a promotion at work that allows you to again convert back to a regular type of mortgage.

Another option is to take out a pension mortgage; this is similar to an interest only mortgage. Except when the mortgage reaches its end, the amount that is still owed can be paid off using part of your pension contributions. You should keep in mind that your employer probably contributes a significant amount to your pension, so will be in effect, helping to pay off your mortgage.

A very similar interest-free mortgage system is the endowment mortgage. Like the pension mortgage, you pay only interest on your mortgage, then at the end of the mortgage term. Your endowment, life insurance will pay off the money that is still owed the mortgage company.

These can be good options should you find yourself in financial difficulties and are having problems paying any kind of monthly mortgage. However, as stated earlier you must not wait until the bailiffs are knocking at the door. As soon as you think, you are having problems contact a qualified online broker, who can help you with quality advice as to the best way to deal with your mortgage problems.

+ Endowment Mortgage

Mortgages and Remortgages

Mortgages and Remortgages
by Andy Silk

If you're using a mortgage to buy your home but are not sure which one will suit your needs best, read this handy guide to mortgage types in the UK. Taking out a mortgage has never been easier.

Variable Rate Mortgages: the lender's mortgage interest rate may go up or down during the life of the mortgage. This usually happens (though not exclusively) soon after a Bank of England interest rate change. Most people consider that opting for a variable interest rate mortgage is best done when interest rates in general are likely to go down. They can then take advantage of these lower rates when they occur. It's a bit of a gamble but if they are right, it could really work in their favour.

Fixed Rate Mortgages: the lender will set the APR (Annual Percentage Rate) for the mortgage over a given period of time, usually 2, 3, 5, or 10 years as an example. The APR for the mortgage may be higher than with a variable rate mortgage but will remain at this 'fixed mortgage rate' level, even if the Bank of England raises interest rates during the term of the mortgage agreement. Effectively, you could be said to be gambling that interest rates are going to go up, above the level of your fixed rate mortgage interest rate. If this happens, your mortgage repayments will be less than with a variable rate mortgage.

Tracker Mortgages: have a lot in common with variable interest rate mortgages in that the APR of the mortgage can go up or down over the term. The key difference between a tracker mortgage and a variable interest rate mortgage is that the lender will set a margin of interest to be maintained above the Bank of England base lending rate. So, as the Bank of England, in line with monetary policy, raises or lowers the base lending rate of interest, so the tracker mortgage interest rate will follow. Over the lifetime of the mortgage, it could be said that the borrower will neither be better off nor worse off because of interest rate fluctuations.

Repayment Mortgages: you will be required to pay a proportion of the capital element of the mortgage (how much you originally borrowed) together with a proportion of the interest that will have accrued on the capital element, with each monthly repayment. In recent years, repayment mortgages have become highly popular over the previous favourite - endowment mortgages. This is because, unlike endowment mortgages, as long as you keep up your monthly repayments, you are guaranteed to pay the mortgage off at the end of the agreed term. Monthly repayments may possibly be a little more expensive but many borrowers say that at least, they have peace of mind.

Interest Only Mortgages: very common amongst borrowers who are looking to secure a second property. The reason being, with an interest only mortgage, the borrower will only be required to make monthly repayments based on the interest element of the mortgage. The lender will require the capital element to be repaid at the end of the term of the mortgage. Again, as with variable rate mortgages, this could be regarded as being a little bit of a gamble because the borrower is hoping that the property will be worth at least as much at the end of the term of the mortgage, as it was at the beginning, allowing it to be sold and the capital element of the mortgage to be paid off. Any capital gain on the property (although possibly subject to tax) is yours. It could be argued that experience tells us that property prices rarely go down in the long term, but it can never be guaranteed.

Capped Mortgages: a combination of the fixed rate mortgage and the variable interest rate mortgage. A cap or ceiling is fixed for a set period of time. During this period, if interest rates in general rise, above the capped interest rate, the borrower will not pay anything above the capped level. Correspondingly, if interest rates fall, then the rate of interest charged by the lender, will also fall so it could be argued that the borrower gets the best of both worlds. It could also be said that a capped rate is like having a set of brakes on your mortgage, but beware, the lender is also likely to charge a redemption penalty on this type of mortgage, making it less portable than some of the other options available.

Discounted Rate Mortgages: here, the lender may offer a reduced level of interest to be charged over a set period at the start of the mortgage term. Many first time buyers or people who expect their salaries to rise considerably during the discounted rate period opt for this type of mortgage but it should be noted that the reduced rate period will come to an end and when it does, the monthly mortgage repayments to the lender may rise sharply. The lender may also charge a slightly higher rate of interest compared with other types of mortgage over the rest of the term of the loan in order to recoup the monies that they have foregone during the discounted rate period. There's no such thing as a free lunch!

Offset Mortgages: an interesting newcomer to the UK mortgage market, although still comparatively rare in terms of choice and availability. The mortgage is linked to the borrower's current account. Every month, the minimum mortgage repayment is paid to the lender but where there is a surplus of cash in the account after other uses and debts have been paid, this is also paid to the lender. Over the months and years, the borrower can potentially pay off their mortgage much quicker and have accrued much less interest than with other types of mortgage provided that a reasonable surplus is maintained in the current account.

So, to sum up, the UK mortgage market has many types of mortgage; any or all of which may be open to the potential borrower, dependent on their circumstances. If you're looking to take out a mortgage, remember that whilst your broker will take care of the vast majority of the work on your behalf, it may still take around 3 months to complete as there is an enormous amount of work that goes on behind the scenes with solicitors and searches, valuations etc. At least now you're armed with all of tehinformation you need on each type of mortgage available to you.

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.

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.

The Endowment Mortgage Scandal in UK

The Endowment Mortgage Scandal in UK - Millions Left with Shortfalls May be Entitled to Compensation
by Martin Nolan

During the 1980’s and 90’s a new concept of property mortgaging arrived in the UK. Endowment mortgages became extremely popular with homebuyers who wanted a secure but affordable method of repaying their mortgage debt. Most large financial organisations were happy to offer these products and they were sold by large banks, building societies and high street brokers.

The general concept of an endowment mortgage was that the customer would make regular installments into an investment fund managed by the endowment provider (the big financial organisations). The investment would eventually generate enough money to pay off the mortgage debt in full and usually the customer would be left with an extra amount or bonus at the end. In addition to this the customer would also have the benefit of life insurance for the duration of the investment period with cover provided up to the value of the endowment maturity value. The overall financial package of a combined insurance and savings product linked to lower mortgage payments, was almost too good to be true. As a result there are currently around ten million active endowment policies in the UK.

Like most things that seem too good to be true, endowment mortgage policies have sadly proven to be extremely disappointing for the vast majority of customers. These investment products are closely linked to the worlds stock markets but with the recent 5 year global recession and sharp downturn experienced by most countries, the anticipated return on investment is proving to be far less than the endowment providers anticipated.

It is estimated that 80% of all existing endowment products will fail to meet the projected target amount and some will have considerable shortfalls. This means that potentially as many as 8 million people in the UK will fail to reap any bonuses from their plans but worst of all may completely fail to pay off their mortgage debt by the time their plan matures.

It was not long before the consumer groups began asking serious questions about the credibility of endowment policies and the regulatory body in the UK Financial Services Authority (FSA) was forced to act following complaints about widespread misselling.

It has since become apparent that millions of endowment policies were mis-sold in that the individuals or organisations conducting the sale, failed to follow the rules and notify the customer of certain key features relating to the advantages and disadvantages of the endowment products. Far too much emphasis was placed on the benefits of the products with little or no discussion about the risks involved with potentially erratic investments that were linked to the stock market. The message was that the plan simply could not fail and this was a flawed and misleading sales pitch.

The FSA have devised a scheme that allows endowment policyholders to make a formal complaint about possible misselling. The rules allow for such a complaint to be made once a “warning” letter has been received from the endowment provider indicating that the plan will more than likely fail to meet the projected target amount (this is known as a policy shortfall). If the complaint is upheld, the endowment provider or the salesman / selling organization must make an offer of compensation to the customer. The average compensation award is thought to be in the region of £5000. Whilst it is possible for customers to complain personally, the FSA process is regrettably complex and many customers will need assistance from “professional claims handlers” in order to pursue their complaint effectively. Many endowment providers corrupt the process by using technical jargon and complex rules. They have also introduced “Time barring” arguments which have been allowed by the FSA. The rule here is that you have generally three years from the date of your first warning letter to make your complaint. This serves to confuse customers and many complaints that are pursued direct without professional assistance will simply fail. The majority of customers do not even bother to complain because of the complexities involved.

Summary: Thanks to consumer groups and professional claims handling bodies the UK’s endowment misselling scandal is gathering a head of steam and victims are now more aware of the issues.

The important aspects for customers to remember are:

• You only have a limited amount of time to complain – 3 years from the date of your first letter from the endowment provider warning about a possible shortfall.

• You must complain now to ensure that any shortfall in the projected target value of your policy is recouped. You may not recover the full shortfall amount but your compensation will go some way to bridging the gap.

• You must also seek financial advice on your mortgage situation because if a shortfall has been highlighted, the endowment plan you have is NOT going to meet your mortgage debt on maturity

If you currently have an endowment mortgage policy you must act now to ensure that you and your family’s future remains secure. Be aware of the issues, be aware of the need to correct the misselling that you have been the victim of and most importantly be aware that only YOU can change the position that you now find yourself in.

For more information on making endowment compensation claims contact The Claims Connection managed by Winston Solicitors a regulated UK law firm.

The Cure For Outdated Endowment Policy: Repayment Remortgages

The Cure For Outdated Endowment Policy: Repayment Remortgages
by Amanda Thompson

If bulls and the bears of the stock market have no effect on your mortgage plan then you must apply for endowment to repayment remortgage. An endowment mortgage is a financial product offered mainly in the UK. Endowment mortgage comprise of an interest only loan secured on your mortgage and an investment in the stock market. As against an ordinary repayment mortgage, the customer pays only the interest on the capital. The balance goes into the endowment fund. This stock oriented mortgage policy was workable in the context of stock boom of the 1980s and 1990s. At the end of the mortgage term, it seemed plausible that the investment would pay off the capital. But present day market status is unreliable and fails to make endowment mortgage a much sorted out plan. In recent years it is appropriate to revolutionize your endowment mortgage to repayment remortgage.

Remortgage is highly misunderstood for over the time we grow too comfortable in our mortgage policy. Holders of endowment mortgage are urged take up repayment remortgage so as to forestall the risk of being in huge debts once your mortgage matures. This you might shun as a possibility. But it is a very functional possibility. Why remortgage? If that is your query! Then you need to read more about your endowment mortgage. Repayment remortgage is very essential because endowment remortgage suffers from two major problems – shortfall and mis-selling.

Most consumers did not realize that their endowment mortgage could not reach its desired target. The risk of shortfall in endowment mortgage is a very strong vote in favour of repayment mortgage. Endowment policy is not an appropriate mortgage for everyone. So, if you have been sold an endowment mortgage without making you aware of the risk involved then perhaps you have been mis-sold their endowment policy. Any of these condition calls for fast action in favour of repayment remortgage.

The trends in the stock market are unanticipated. You never know when the wind changes the direction and you might not be able to repay your mortgage. This could mean capitulation of your endowment policy. Before this effects your credit status get a repayment remortgage. Mortgage is secured loan keeps your property as a compensation of the loan. Under no circumstances you can risk the possession of your property by giving consent to an incompatible mortgage deal. Remortgage to a repayment mortgage is definitely a much more dependable option. The monthly payment of repayment remortgage pays both the loan amount and the interest. As long as you don’t falter with making your repayments at remortgage, you will be able to forfeit your remortgage completely by the end of the loan term.

The remuneration with repayment remortgage is bounteous. The wavering of the stock market will no longer amount to your cause of concern. You will continue to enjoy all the benefits of your policy with a repayment remortgage. Endowment mortgage frequently fails to accumulate any funds and prove to be expensive than a repayment remortgage. The major disadvantage with endowment mortgage is that if you stop paying for your premium in the early years, the cash in value of endowment policy is very low. Selling the policy would mean loosing all the money that you have paid in form of premium. This makes endowment mortgage a very inflexible mortgage. By selecting a repayment remortgage over endowment mortgage you will have enough money and would not have to rely on other sources. By opting for repayment remortgage your claim for endowment compensation will not be exacted.

For all the twenty to twenty five years of your mortgage, you can’t keep on checking the stock market news in a hope that it may illustrate an affirmative after effect. You have exhausted enough money like that. Your money deserves a convalescent capitalization. You ought to have a repayment remortgage. Security, that your mortgage will be paid off, is the primary achievement of repayment remortgage which is not offered by endowment mortgage. Living in constant fear is not a recompense that will avoid you from trading your endowment policy for repayment remortgage. Indubitably, your monthly outgoings with repayment remortgage will the higher but there will be contentment which is our constant endeavour in every enterprise.

Amanda Thompson holds a Bachelor’s degree in Commerce from CPIT and has completed her master’s in Business Administration from IGNOU. She is as cautious about her finances as any person reading this is. She works for the personal loan web site www.chanceforloans.co.uk

Financial Freedom: How To Achieve It With Your Home

Financial Freedom: How To Achieve It With Your Home
by Geoff Morris

Do you still believe that your main objective in life is to pay off your mortgage?

Many people these days are getting more and more concerned as they approach retirement age. Even those in their late twenties are beginning to become concerned about the effects of old age. What has brought on such a dilemma in those so young? It is the plight of the pensions in this country that is causing this concern?

Probably.

But there is a solution to all this that could not only remove this fear, but also dramatically improve the lifestyle of all concerned.

What is this solution?

Most people are brought up to believe that their main goal in life is to own their own house, and have fully paid for it by the time they retire.

Why?

What is the point in just scrimping and scraping throughout your working life only to have to sell your house and move down market, or worse still, sell up and rent, while you just try and make ends meet on a pitifully small handout from the State?

As soon as you have bought your first house, you should be thinking about buying your second and your third, and your fourth…..

“What on earth for” , will be the retort of most of you, “ we can only just afford the repayments on the first one, let alone buy any more”

Let’s look at the way most people buy a house, and then lets look at some alternative methods.

The usual way of acquiring a house is to put down a large deposit – somewhere in the region of 10 – 15%, which on an average £200,000 house will equate to around £30,000.

The next route is to take out a repayment mortgage over a fixed term, say 15 to 25 years, where you will be paying a combination of interest on the outstanding loan, as well as repaying the capital.

On top of this, most people will take out some other financial facility, such as an endowment policy coupled with a life insurance policy for the period of the mortgage, so at the end of the mortgage term, they will not only own the house outright, but also have a lump sum. Not a very large lump sum, as a lot of the insurance premiums would have gone towards the life cover purchased.

Now, we have all seen how endowments have failed terribly of late due to overoptimistic performance, so there is no guarantee that the above route wil produce anything other than a tremendous financial drain on this person for a very large period of their lives, and with no real plan for their future except ownership of a house, a small endowment, and probably a ridiculously low pension to keep them going in their retirement years.

However, there is another way. Interested? Then read on….

Let’s look at a totally different scenario, where the couple looking to buy their first house took specialist advice from one of the more reputable property clubs that are around. These clubs are admittedly usually aimed at property investors, but isn’t that what we all should be?

Now, let’s take our example of the £200,000 dream house for our hopeful house buyers. They see a development of dream houses by one of the nationally recognised house builders. Do you think they could persuade the developers to pay the 15% deposit for them? On their own – not a chance, but if our hopefuls go via one of these property clubs, the chances are that the developer would now be willing to pay the 15% as a ‘gift’.

I can see your expression now. “Not a chance” you say. But it does happen, and we can arrange introductions to make this possible.

So, you now have bought your house, and instead of having to find £30,000 deposit, al you have to do is get your self a mortgage.

Now, when you move into a house, especially in your early years, the chance of you staying there for the term of the mortgage is very unlikely. You may change jobs; you may want to move to a different area, or there may be many other reason why you will want to move within a few years. So, the house you have bought is only a temporary residence, and you could almost treat it as a rental property – but with one big big difference.

Whether you paid the deposit, or whether you got this ‘gifted’ deposit from the developers, this money, this equity in the property is YOURS. And not only that, it is a historical fact that house prices, given time, will always increase.

So as this is a ‘temporary’ abode, why go for a mortgage that includes a repayment element in it? Why not go for what is known as an interest only mortgage? What this is then is a loan where you never pay back any of the principle of the loan, but only the interest on it. You will have to pay back the capital at the end of the term, but we will be showing you how easy that can be achieved a little bit later.

Your situation now is that you are paying the barest minimum mortgage repayment, but are also sitting on a considerable amount of INCREASIING equity! You do not have to pay for an expensive endowment policy, although a life policy may well give your other half a comfort blanket.

But now look at another effect, which is called ‘Leverage’. With a no-money down deal, the leverage is enormous, but consider the case where you bought a £200,000 house and put a 10% (£20,000) deposit down on it. If the house goes up in value by 10% the equity in your house will have increased by some £20,000. Now, your initial investment was £20,000, so you will have DOUBLED your investment in 12 months. Not bad huh! Try doing that at your local Bank, or even if you dare, the Stock Market!

So, let’s say house prices went up by just 5% per annum over the next 2 years. This would mean an increase in your equity (equity being the difference between the value of your house and the amount of the mortgage on it). This would mean you now owned an extra £10,000 after the first year (5% of £200,000) and £21,000 after the second year (5% of £210,000 + £10,000 from the previous year). This would mean that your house was now worth £221,000, of which you now owned (£221.000 - £170,000) which comes to some £55,100.

Wow! £55 Grand that belongs to you!

Now, let’s do something with this money!

With a good clean credit record after the last 2 years (assuming you had no defaults on your mortgage payments) you could now refinance your house. You could go to your existing lender (if you have a penalty period in your mortgage), or you could go to any other lender and negotiate up to 90% (subject to your financial status) of THE NEW VALUE OF YOUR HOUSE.

90% of £221,000 is £198,900. So you can release nearly £30,000 out of the equity in your house. And the best thing about this money is it is totally tax free! No capital gains to pay and no income tax! If you don’t believe me, speak to an accountant.

Many people have in fact done this, but have then spent the money on new cars, boats, holidays and the like, but once the money is spent in this fashion, it is gone for ever.

But how about if you went and bought another house, this time as an investment property?

You never know, your friendly developer may be persuaded to give you another gifted deposit, in which case you could buy several more houses (your only expense being legal fees, broker’s fees, and stamp duty, which on a £200,000 property would come to around £5,000). In this case, with your £30,000 you could buy another 6 houses!

But how do you go about buying all of these houses? And how, if they all have £170,000 mortgages on them are you ever going to meet the repayments. Assuming an interest rate of 5%, that would be about £700 per property per month! £4,200 per month mortgage! Heaven forbid. How would you sleep at night with that level of debt to your name?

Some years ago this would have been impossible as there was no real financial system that would enable an individual to do this. However, now, you can get what is known as a ‘Buy To Let’ mortgage, where lenders will usually lend up to 85% of the property in question, as long as the anticipated rental income will cover the repayments , plus a bit. The ‘plus a bit’ tends to vary from lender to lender, but you can very quickly get an answer from lenders on whether they will meet the loan. Also, if you are going to get a ‘gifted deposit’, there are only a few lenders who will offer 85% of the list price, so once again, you will need to use a property club or a broker who is used to this situation.

So, you are now the lucky owner of 6 investment properties, as well as your own house.

You also have a commitment to pay 6 investment mortgages as well, and we totalled that as being some £4,200 a month!

But – you don’t want to have to pay that do you? No! You get tenants in, who very kindly pay the mortgage for you (plus a bit for your pocket and 10% or thereabouts for a managing agent to look after the tenants). You can also take out insurances to cover loss of rent, damage, legal fees on disputes, so it is eminently possible for you to become an ‘armchair’ investor landlord.

However, you now own 6 investment houses, not one. You have already seen how equity can build up in your own house. So let’s look at each of your investment properties.

If each property was worth £200,000, and you got a 15% gifted deposit on each one, you are already looking at an equity of some £30,000 in each unit.

If each property increased in value by just 5% per annum, that’s £10,000 from every unit.

Just look what you would be gaining. You would now own a property portfolio of 6 investment properties worth £1.200,000 of which you would have instant equity of around £180,000, and this would be increasing (at just 5%) of some £60,000 every year. Without compounding this increase, if you sold all of your investment properties after 10 years, you would walk away with well over THREE QUARTERS OF A MILLION POUNDS!

So, do you still believe that – whatever the cost – your main objective in life is to pay off your mortgage?

By all means, have this intention – but only after you have made so many other gains that you can really afford this luxury.

Geoff Morris has built up a multi-million pound property portfolio in less than 18 months. He has written a number of articles aimed to help others follow the same path to financial freedom. His free reports and consumer guides can be found at www.propertyprofits4you.com.

How long does a mortgage last?

How long does a mortgage last?

There is no right length (term) to a mortgage. The standard term is around 25 years, and most of us tend to have a mortgage throughout our working lifetime. With the large sums involved, this spreads the cost and makes your monthly payments more manageable.

However, you can choose a different term if it suits you and the lender agrees that you can afford it. If you can afford a shorter term you may have higher monthly payments but pay less in total. With a longer term, you may pay less each month but more in total.

Try not to make financial commitments that go past the age you retire unless you're sure you'll be able to afford the payments.

Are You Missing Out On Endowment Shortfall Compensation?

Are You Missing Out On Endowment Shortfall Compensation?
by Keith Lunt

Millions of pounds of compensation have been paid out by insurance companies. Are you entitled to a share? Could a claim now help to get your mortgage repayments back on track for the future? But you must act quickly - insurance companies are only allowing claims for a limited time.

If you took out an endowment insurance policy with an interest only mortgage after April 1988, it is highly likely you were one of the millions of victims of Endowment Misselling.

It is possible that you have received a letter from your endowment company warning you that your endowment investment is not on track to pay off your mortgage and advising you to find alternative means to pay off your mortgage. This is called a "Red Letter" and from the date this is sent you only have three years to claim compensation.

If you were told the policy would certainly pay off your mortgage or were promised an extra lump sum at the end of the mortgage or have had to make extra contributions to keep it on track, then it's likely that you could successfully claim.

Endowment policies should have been sold to customers willing to accept the risks involved with them. If you are normally a careful or cautious investor then a less riskier repayment mortgage would possibly have been better for you. There always was a risk that your endowment would not cover the mortgage, but had you known about that risk at the time would you have still taken out a policy?

If the answer is "no", then you should not have bee sold the policy - you are a victim of misselling. Instead of an interest only mortgage, you should have been offered a standard repayment mortgage.

Finding out whether a claim is worthwhile progressing is quite painless - just contact a suitable solicitor. Many have tools on their websites that will quickly allow you to determine whether a claim might succeed and this, as well as talking to the solicitor is normally free.

If you might have a claim the solicitor will help you through the paperwork and deal with the insurance company for you. They will also check your compensation and make sure that the offer is correct.

If you want to know whether you can claim, look at www.endowment-claim.org.uk. It only takes a minute to find out the answer or you can just leave your contact details and someone will call you back.

Keith Lunt runs several financial sites including www.endowment-claim.org.uk.

What You Need To Know About Endowments and Endowment Shortfalls

What You Need To Know About Endowments and Endowment Shortfalls
by David Miles

Endowments and endowment mortgages have received a lot of bad press in recent years, amid concerns over falling policy values and accusations of endowment miss-selling.

This article attempts to answer some of the questions and concerns you may have about the way endowments work, what's happening to them, and what you can do to ensure your mortgage is paid off at the end of the term if you have an endowment mortgage.

What is an endowment mortgage?

There are two basic types of mortgage. The first is a repayment mortgage, where you make one monthly payment to the lender which is part interest and part repayment of the original capital.

Then there are interest-only mortgages, where your monthly payment to the lender is just the interest on the original loan and the mortgage debt remains unchanged. You then make separate payments into an investment scheme (such as an endowment), with the idea being that at the end of the mortgage term this investment will have grown sufficiently to repay the mortgage.

An online mortgage calculator can give you an idea of the difference in payments to your lender between an interest-only mortgage and a repayment mortgage.

Interest-only endowment mortgages were very popular in the 1980s and 1990s and were often chosen in the belief that the endowment would end up being large enough to clear the mortgage and still leave a tidy sum of money left over as a bonus.

How do endowments work?

An endowment is a long-term savings policy, typically running for ten to twenty-five years. An endowment plan has what is known as a "sum assured" value. If the policyholder dies during the life of the endowment, it pays out the sum assured. In the case of endowments linked to mortgages, the sum assured is equal to the size of the mortgage. The payout in the event of the death of the policyholder is guaranteed but, if the policyholder survives, the final value of the endowment at the end of its term is not guaranteed.

Endowments can be unit linked, which means that you buy units in a fund, or they can be "with profits".

How does money grow in a with profits endowment?

There are two ways in which a with profits endowment can increase in value. Firstly, the insurance company may add a bonus to your policy each year. This is known as a reversionary bonus and is usually a percentage of the amount of profit made by the fund over the previous years.

The amount added in this way may only be a small amount. However, once added, these bonuses cannot be taken away - hence the name reversionary bonus - and will belong to you when the policy matures.

Then there is the terminal bonus. This is a separate sum of money which the insurance company can add to your endowment policy when it matures. These terminal bonuses are discretionary and may not be applied at all.

What are the advantages of with profits endowments?

The idea of a with profits endowment is to smooth out fluctuations in the stockmarket.

With a non-with profits endowment, your investment is linked 100% to the stockmarket. Therefore, there is always the possibility that the investment value could fall just at the time when you need the money.

By using with profits endowments, insurance companies get round this problem by giving you a slightly smaller percentage of any fund growth as an annual bonus and try to smooth out future annual bonus declarations.

The point of this is to try to ensure that, no matter what happens to the returns of the fund, you are guaranteed a certain minimum amount when then endowment policy matures.

Why don't you get the entire year's gains as a bonus?

On the one hand, the insurance companies and their fund managers want you to have as much security as possible - hence the reversionary bonuses which cannot be taken away at a later date.

On the other hand, they are also trying to maximise long-term growth by investing your money in stocks and shares, property, gilts, and cash. All of these involve a degree of risk.

What is the problem with endowments?

Anyone taking out an endowment policy, whether on a with profits or unit linked basis, has to be given a written illustration by the insurance company of how much the policy might be worth at maturity. When providing these illustrations, insurers have to make an assumption as to the rate of growth per annum that will apply to the money you are paying into the endowment. This assumed rate is known as the projected rate, and there is no guarantee that this rate will be met in reality.

Until a few years ago, the projections were usually based on a mid-range growth rate of 7.5% per annum. In the early 1980s, the assumed growth rates used in the illustrations were even higher. Therefore, the monthly endowment premiums were low by today's standards, because they were set to reflect these high projected growth rates.

Interest rates and other economic factors, such as stock market growth and interest rates, are much lower now than they were in the 1980s and 1990s, so it has now been necessary to reduce projected rates of growth for people taking out a new endowment policy today. As a result, the monthly premiums for a new endowment policy today will be higher than they were in previous decades.

How does this affect existing policyholders?

Because actual growth rates have been lower than the projected 7.5% rate, an endowment policy taken out in the 1980s or 1990s may now not be worth enough at maturity to pay off the interest-only mortgage to which it is linked.

Insurance companies are therefore assessing the state of people's policies and contacting them to advise what action they should take now to avoid a potential shortfall at the end of their mortgage.

How will I be affected?

In most cases, if you took out a with-profits endowment in the mid-1980s or earlier, the fund should be sufficient at maturity to pay off the mortgage. This is because the money in your endowment policy will have benefited from the higher rates of interest and better stock market growth of the 1980s.

But, the shorter the length of time your endowment has been running, the greater the potential for a shortfall at maturity.

It is impossible to predict exactly how large this shortfall may be, as so much depends on future fund performance between now and the time when your endowment matures. Insurance companies are trying to assess the issue by looking at how much has been accumulated in your fund so far and making more conservative estimates about future growth.

What can I do now?

There are a number of options:

• 1. You can increase payments into your existing endowment policy (subject to Inland Revenue rules), or take out additional endowment policy with the same insurer or a different insurer. However, you may decide you don't want to be tied into another endowment.

• 2. You can ask to extend the term of your endowment policy, subject to your mortgage lender agreeing. This is probably not a good idea if it means your policy would continue beyond your retirement age.
  

• 3. You can set up an additional investment, such as an individual savings account (ISA). An ISA may be cheaper and can offer a wide range of investment choices to suit your attitude to risk.
  

• 4. You can ask your mortgage lender to switch part of your mortgage (equivalent to the projected shortfall on your endowment) to a repayment mortgage. You can get an idea of the costs of the new repayment part of your mortgage by using an online mortgage calculator.
  

• 5. You can use any other spare lump sum to pay off part of your mortgage. You will need to check first to see if this would make you liable for any early redemption penalties from your lender.
  

Which is the best option?

Everyone's situation is different, and everyone has their own particular preferences. If you are unsure what to do, you should take professional mortgage advice to help you review your options and come to a decision as to what to do.

Should I just cash in my endowment?

This would almost certainly be a mistake. Many endowment policies are structured such that the management charges are highest in the early years. If you surrender the policy early on, the amount you get back may well be less than the amount you have paid in up until now.

Also, you need to bear in mind that a large proportion of the final value of a with profits endowment depends on its terminal bonus. The size of this bonus will not be known until the policy matures.

So, the best strategy is normally to keep the endowment in place. If you need to cut down on your monthly outgoings, you can leave a policy "paid up" (although you may incur penalties for doing this). This means that you do not pay any more money into the endowment, but leave it to mature on the original date for a lower amount. If you do this, you will need to make sure you still have sufficient life cover to protect your mortgage.

It is possible to sell endowment policies on the second-hand endowment market. The amount you get will depend on the policy and how long it has left to run. Again, this is an area where you would be well-advised to talk to a professional before taking any action.

David Miles is the editor of a number of personal finance websites including UK Mortgages & Remortgages and The Cash Clinic - a UK Personal Finance Portal.

Please note that this article is for general guidance only and does not constitute financial advice. You should seek professional advice with respect to your own specific circumstances.