Sometimes people take television too seriously. Take the BBCs ?Bake Off' row. The last two winners were male and so it's no surprise this years winner was female to level things up a bit to ?bat back' the inevitable claims of sexism, although some would say loading the female entrants up this year was exactly that. What some people don't understand is they pick the contestants for these shows for exactly that reason - to rile up the audience so to sustain an audience. The pretty model was always going to get to the final as she ticks every box ? apart from being able to bake a cake.
At the start of the reality TV thing it was quite interesting viewing but ten years on it is exhausted and simply cast to please a mixed audience dynamic, why I now prefer shows like Salvage Hunters to pass the day than these contrived competitions of tears and tantrums.Salvage Hunters does exactly what it says on the tin. The host Drew Pritchard is a real life salvage/antiques expert and goes out with a big white van with an employee to buy what he thinks is valuable scrap to sell it on at a profit, simple as, which he achieves. No tears or playing up to the cameras. Cash ? handshake? job done! No placing of valuable items in the junk by the production assistant to make things more interesting, as far as I know. At the end of the half-hour show he takes his booty home to his wife and the company staff and they set about restoring it. It's a simple pleasure of a show and something I would like to do as a job one day. It's amazing what old junk and rubbish can fetch and Drew's nose sniffs out the best stuff.
As he is essentially chasing antiques and retro for the interior design and collectible markets his yard isn't full of rusting cars and scrap metal as you would envisage although he does buy old cars, his weakness, especially Land Rover's.I wouldn't say the balding 40-something Pritchard is a particularly charismatic chap for television and very much the boss/employee dynamic going on in the show but he knows his stuff and that's what makes the show so interesting and soothing. Who knew that old mirrors with those black specs on from all that damage can actually increase the value of the product? The middle-class have mixed ideas on retro cool. Pritchard tends to give the guy or girl he is buying off a fair deal although if he can get it cheap and sense a weakness he will take advantage of the seller. In fact he is a master class in getting the right price. He tends not to buy a lot of stuff on his visits around the country as he is only looking for specific quirky items at the right price.
To give the show more prestige he and his partner in crime will visit old country houses and museums and the like to try and buy there, but the moment he points out something he likes up goes the asking price and then they don't want to sell, realizing that junk in the shed was far from junk. That happens a lot with most of the old country houses really on to show off their wealth.The job looks more fun than it probably is and Pritchard operation quite impressive. But its one of those jobs that looks very rewarding and somewhat profitable, when you consider the stuff we unwittingly chuck out as rubbish. Even old metal gates can fetch sixty quid. They had this chap on last week who had built his impressive six bedroom house completely out of junk and it was a real palace.
Admittedly a lot of these guys who store junk are single and have wiry grey hair growing out of their nose and ears and extremely oily clothing but each to their own.The show goes out on Quest at 5pm weekdays and repeated some evenings. It's currently running a new series alongside previous ones so hard to miss it on Quest. As I say, unlike shows like Bargain Hunters and the US show Storage Hunters and Baggage Battles it's not one huge set up and feels naturalistic and reassures us that if you know your stuff you get the best deals in life.
Drew is only really on the show to showcase the trade and plug his company a bit and just share a job he loves. He doesn't want to be on a panel shows like other reality wannabe stars and just talks shop, a sort of younger version of Fred Dibnah.I think this will appeal to any audience and especially those in the trade. Its one of those shows you can learn stuff and maybe, even, encourage you to have a crack at the trade. I am more of fan of the salvage side of things as from experience I know the general antiques trade is mostly retired people wasting their savings by flogging the same stuff to each other over and over again whilst the auction houses and dealers take the big cheques. My mum does it and she has sheds full of stuff she can't sell yet will always announce she is a great saleswoman when she does sell something for more than she bought it for. Petrol and labor costs don't seem to count in the loss profit. My mum's tactic of buying lots of crap and hiding it away and selling very little of it is not a good business method.
We have recently been looking at ways that we can pay off our mortgage more quickly as we want to be debt free as soon as possible, this would then open up opportunities to either make changes to our lives or to look at other investment opportunities like buying a rental property with another mortgage.
Fortunately the most sensible thing that we did was eighteen months ago when we remortgaged our property switching the loan to a different provider and opting for a tracker mortgage, although we had some fees to pay at the time this has meant that as the interest rates have been reduced each month almost by the Bank of England we have seen our mortgage paymments reduce substantially, initially we took the spare money and replaced the money we spent on the remortgage and to be honest the rest we probably wasted however a few months ago we had a re-think.
First we used the spare cash to clear an unsecured loan as this rate was a lot higher than our mortage rate, then with the money we saved on our loan payments plus the amunt our mortgage had fallen by we put the money aside into a monthly interest account and whe the balance reaches £2,000 we paid a lump sum off our mortgage. This also meant our mortgage payments dropped by a little bit more, we have since made another repayment and are half way towards another, this is great as we can see the balance reducing and in effect we will ultimately pay the loan off quicker.
One word of advice though do check that there are no charges for making a repayment on your loan otherwise the mortgage company could charge you. Also do remember that once you put the money into your mortgage the money is tied up in the house.
If a person using an ISA to repay their Mortgage was to become Unemployed or off work due to Sickness or Accident they would NOT be entitled to Means Tested State Benefits if the value of the ISA was over £16,000. The reason for this is the DWP treat the ISA as Accessible Savings.
The FSA being the Governments financial watchdog listed Endowments, ISAs and Pensions as suitable methods of repaying an interest only mortgage but made no mention of the DWP rules regarding ISAs. Most Endowments and Pensions used for Mortgage repayment are unaffected as they are not deemed to be accessible Savings.
There could be in excess of 500.000 ISA Mortgages in existence.
Do you think the people using ISAs to repay their mortgage should be made aware of the facts ?
ie: they may have to use the funds they have accumulated to repay the Mortgage to support themselves.
The ideal solution would be to treat ISAs used for Mortgage repayment the same as Endowments and Pensions.
If you agree, then please go to the Prime Ministers website and endorse this petition
*** PLEASE NOTE: Nothing in this opinion constitutes financial advice. You should always seek advice from a qualified financial advisor who will take into account your individual circumstances.***
A mortgage is probably the single largest financial commitment that any of us are likely to make. Yet, surprisingly, it is one which many enter without giving it the serious thought that it requires. For many, the decision to purchase a property is the part of the process that takes the most time and given the most thought. The mortgage is almost an after-thought which starts and ends with how much will the bank let me borrow?
How much the bank will let you borrow should, in my opinion, never be the first, and certainly not the last, question. The right question to ask is how much can I afford to pay back each month?
At the risk of teaching Grandma to suck eggs, a mortgage in laymans terms (not legal terms!) is simply a loan secured against a property. You agree with the lender that you will repay the loan, together with interest over the course of (or at the end of) the term and, to ensure that you keep to your side of the bargain, the lender will take a mortgage over your property which it can enforce in the event that you do not make the right payments at the right time. Once you have repaid the loan (plus interest) the bank will release the mortgage over your property.
Given the fact that you stand to lose the roof from over your head if you dont get it right, the question of affordability should be foremost in your mind. One way of working this out is to do a simple set of accounts. Write down on one side of a piece of paper all of the money you have coming in each month, be it salary, benefits or investment income. On the other side write down all of the amounts you have going out. These will include direct debits for things such as gas, electricity, council tax (this figure can be obtained from the council responsible for your new property or estimated) and TV licence, food bills, entertainment expenses and credit card bills. Dont forget to include one off payments, such as the cost of insurance or holidays in your calculation by taking your annual spend and dividing it by 12 to get the monthly amount. Include too, any amounts which you would like to save each month. The value of savings should not be underestimated it might just provide the pot to get you out of trouble. Total up both columns and take your outgoings away from your income. This should hopefully give you the figure of how much spare money you have to spend on a mortgage. By way of example:
This scenario leaves a maximum of £1030 to play with for a mortgage repayment each month (NB these figures are inaccurate estimations of the expenses!). At an interest rate of 5.75% (and not taking into account any rate rises) this would mean you could afford to borrow around £160,000 over 25 years.
Theres an important assumption there though: the fact that it doesnt take into account interest rate rises. If you really are putting ALL of your spare cash into a mortgage and the rates do rise you could find yourself unable to pay the loan. Similarly, if, for example, you are relying on two wages to pay the bills and one of you loses your job, where will you be? Can you afford to take a drop in salary and still make those mortgage payments? It can pay to be cautious. You never know when redundancy, illness or other life event might hit!
Having worked out what you can afford (rather than simply what the bank will let you borrow usually what you can afford will be less than the maximum a bank will lend) the next question to ask is what type of mortgage do you want.
The market is flooded with products but it can be simplified. At its most simple the loan you take out will be either a repayment or an interest only loan. The difference between the two is when you pay the actual loan amount back. With a repayment mortgage you will pay back a little of the loan each month so that the amount outstanding falls over the term. With an interest only mortgage you only pay the interest on the loan during the term and then pay the whole of the loan back at the end of the term. In order to do this you will need some kind of linked investment product that will help you to ensure that you have enough money at the end of the term to pay back the loan. Traditionally this investment product would be an endowment but now there are various other investment vehicles that are available including ISA and other tax efficient vehicles. Most people, however, will opt for (and probably benefit from) a repayment mortgage.
The choice is not over here though. Youll then have to decide what kind of interest youll have to pay (and, unfortunately, the answer is never none!). There are a variety of products on the market from the simple variable rate mortgage through to a capped rate. Which you opt for will depend on your circumstances.
The headline rate for a variable rate mortgage will often (but not always) be the cheapest. The rate of interest you pay will vary over the term of the loan according to market conditions. If the Bank of England base rate rises you can be sure your mortgage rate will rise. If it falls then your rate should fall too, although dont expect it to fall as quickly as it rose when the rates went up! With a variable rate mortgage you cannot be 100% sure on day one exactly how much your repayments will be at any given point during the term of the loan.
If it matters to you how much you pay then you may be able to opt for a fixed rate mortgage. Here the interest rate will be fixed for a period of time, generally between 2 and 5 years and so youll know exactly what youll be paying. The trade off here is often a lock-in for the period of the fixed rate meaning that if you want to change your mortgage during this period there will be a penalty of some kind. After the fixed rate period the mortgage will generally revert to a variable rate.
A halfway house between these two types of mortgages is the capped rate. Here you have a variable rate mortgage but a promise from the lender that the rate will never rise above a certain level. The rate will vary until the variable rate goes above your cap and then at that point the bank cannot charge you any more than the capped rate of interest. Again, the capped rate is likely to be for a 2 to 5 year period and there will be a lock in in most cases.
If money is tight to start with you might also be tempted by a discount rate mortgage. Here you have a variable rate product but the rate is discounted for the first few years. This can be useful but you are likely to have a lock in and may have to pay back the difference between what you paid under the capped scheme and what you would have paid with a normal variable rate product if you want to end the mortgage early.
Enough choices? Not quite .
Increasingly popular are what was known as Australian style mortgages when they hit the financial scene, but are probably better referred to as current account, flexible or off-set mortgages. These all vary enormously from provider to provider but essentially they allow you to use any savings you have to help pay off your mortgage without losing access to those savings. They may also allow you to overpay, underpay and even take a break from paying your mortgage. If you have ANY spare cash at the end of the month you can often save a small fortune with one of these mortgages, but again, personal circumstances vary. The way that most of these mortgages work is that you have two pots a loan and a savings pot. If you have £100k on loan and £10k in savings you agree not to earn any interest on your £10k savings but instead only pay interest on £90k of the loan. As interest is calculated daily this means that you really can use the concept to your advantage and every extra payment that is made has a real effect on the amount you will pay in interest on the loan and the length of time it will take to pay off the mortgage. Sites such as Virgins One Account will have calculator tools that demonstrate this much better than I could by just using words.
Theres an added incentive if you are a taxpayer too as you dont pay tax on interest saved (just earned) in effect you save tax. Youd have to be earning upwards of about 9% on your savings as a higher rate taxpayer to earn more interest than the amount you save by paying less interest on the mortgage. Its complicated maths, but it works.
There are plenty of other things to consider such as loan portability (whether you can simply transfer your mortgage if you move) but the above should have given you a taster for the kind of things you ought to be asking. In my opinion, when youre talking about the roof over your head, it pays to be prudent. You have to take some risks in life but knowing how to minimise those risks can make the difference between that 4-bed house you always dreamed of and a life of worry and stress wondering how you are going to meet the next bill.
*** PLEASE NOTE: Nothing in this opinion constitutes financial advice. You should always seek advice from a qualified financial advisor who will take into account your individual circumstances.***
Hi all, I kind of am writing this piece after some serious thinking on whether I should buy my first property or not. What I am going to say may not be true for everyone but it definately requires some thought.
With the current house prices / interest rate structure it is too difficult for first time buyers to get on the property ladder. Nothing new huh? Yeah, but why do we still all try and save up for a measly 10-15% deposit?
Buying a house/flat etc is not a joke, I personally feel the following are things one needs to consider before taking the plunge.
1. Stamp duty on the property - depending on what the price is , it can be anything from 1% to a stagerring 3% ( I am assumming no first time buyer will pay more than £500k for their first property!)
2. Legal costs - budget for £1500
3. Valuation fees - can be of any range - £300 -£500
4. The all necessary deposit - If you take on a mortgage more than 5 times your salary - you are risking alot . i believe interest rates will peak at 5.25% by mid next year.
5. finally think of how much you want to spend on white goods, furniture, fixtures etc.
6. Not over yet! Now add on your current bills :
a) car insurance / travel cost per month / petrol / MOT etc should all be included
b) phone bills / mobile phones etc
c) food bill
d) I am single , I dont have children - If you do add on these costs.
e) entertainment costs - drinks / nights out / dineer out
f) medical/dental bills etc should aslo be budgeted for.
When used to budget my bills I always added on a 5% extra on top. I believe this is the sensible way of budgeting as then you have provided for any emergency cash you may require. Remember, if you have to borrow maoney so that you can afford to live in your own home - that is a bad investment!! An investment is meant to make you money not something you lose out on!
ALOT TO THINK ABOUT ISNT IT? On a serious note, once you do this and you haven't got any savings per month than DO NOT jump into it blindly!! If interest rates rise you will be seriously stuffed.
Golden rule of thumb : - Do Not do Something which you will regret later!!!!!
If you're looking to put in an offer on a house, then you'll need a mortgage. You arrange a mortgage with a provider. The Estate Agent can help you with this (they get commission for it, so they're very keen on helping!), or you can do some research (through magazines such as Which Mortgage? or on the net) to find out what mortgage suits you best, then talk directly to the bank/building society offering it to see if they'll approve you. Different banks and building societies will each have slightly different mortgage products. They will have different interest rates, will be willing to lend different amounts to the same person (e.g. one bank will only give a £60,000 mortgage to a person on £20,000 p.a. whereas another might happily lend £80,000). They will have different repayment periods (e.g. pay back the mortgage after/over 20 years, or 25, or 30). They may also have different "incentives", such as giving you some cash when you take out the mortgage, which can be helpful to pay stamp duty or solicitor's fees, or have a discounted interest rate for the first year or two. There are a huge variety out there. Think about what you might want. Typical types of mortgage are: 1. Discounted. This mortgage will have a lower interest rate for a short period, so that the first few mortgage payments are cheaper. This period can last for a few years in some cases. After this period, the interest rate reverts to normal and the monthly payments go back up again. 2. Variable. Here the interest rate on the amount that you've borrowed varies in line with changes in the actual interest rate. Sometimes this is linked to the Bank of England's interest rate changes (often called "Tracker" mortgages as they track the base rate), sometimes it's more at the discretion of the bank when and how much it changes (and they tend to take advantage, by not reducing it entirely in line with base rate changes). 3. Ca
pped. Here the interest rate will change from time to time, but will not exceed a certain maximum interest rate. 4. Cashback. This is normally a variable mortgage, but the borrower gets a cash lump sum when they take out the mortgage. The "incentive" type of mortgage, such as cashback and discounted mortgages, will come with a "lock-in" period where you can't remortgage with another bank for a fixed period without paying a release fee. Otherwise you could take out a cashback mortgage, get a free cash lump sum, then move straight to another mortgage provider! These are just the varieties in interest rates and incentives. There are also more fundamental differences which affect how you repay the amount you've borrowed. There are three main types of mortgage in this respect. 1. Repayment - under a repayment mortgage, every mortgage payment you make goes to pay off the amount you've borrowed. Very straightforward. 2. Endowment - less popular at the moment because the stock market's not been performing too well. Here, every payment you make goes to buy stocks and shares or similar products, and the idea is that at the end of your mortgage period these stocks and shares will have accumulated in value to the point where they can be sold, and the amount raised pays off your mortgage. Obviously a bit of a gamble - if the market's down then you might not have enough to pay off your mortgage, but if the market's up you might be left with extra cash! 3. Set-off - here, all your bank accounts are linked with your mortgage account, and you can choose to forego interest on your savings account and current account, in return for which your interest rate on your mortgage is reduced. These are usually used in conjuction with repayment mortgages. As you can see, it's a pretty complex area because so many different products are available. Read up about it in a suitable mortgage magazine, or
on the web. If you feel confident enough to make your own decision then, fine, but otherwise you could always go to an independent financial adviser or the estate agent. Don't forget that, if you fall behind with your mortgage payments then you may lose your house, so don't borrow more than you can afford! Always remember that, if the interest rates go up in future, so will your monthly repayments, so although you might be able to afford a big mortgage now, don't overstretch yourself.
Currently, eight million homeowners have mortgages that depend on an Endowment Policy to pay off their loan. But Insurance Companies now reckon that up to five million of these policies might not grow enough to clear the mortgage after 25 years. In my opinion, if that is what the Insurance Companies reckon, then I conclude that the true figure will be much higher. Even where the policies may pay off the debt, then I guess this will be for those policies taken out, say over 20 years? ago and where the home-owner had been anticipating a large surplus from the policy in addition to the receipt of sufficient capital to pay off their debt. It is of course the massive decline in the stock market over the past two years, and the consequent decline in the annual and terminal bonuses for Endowment Insurance Policies which has caused this crisis. This means that those who took out policies to pay off their mortgages are generally now extremely worried, as they receive notices from their Insurance Companies or Mortgagers. The Consumers Association (from Stage Left) are now murmuring that many will have claims for being ?miss-sold? such policies. In reality, I have little sympathy for those who receive these notices from their insurers/mortgagers warning them that the investment plans that they were sold now appear to be failing to match their predicted performance criteria. These criteria were always, in my opinion, challengeable, and the companies are generally protected by the small print warnings that ?Past Performance cannot be guaranteed for future performance?, or summit similar. Those with memories of the stock market slumps in 1974 and in 1987 could easily predict that another was always ?just around the corner?, and that growth predictions from any investment term are always time-sensitive. FACTFILE OK, for those who don?t know the facts, here goes. With an Endowment Mortgage, you do not repay any of
the capital you borrow during the term of the loan. Instead, the endowment policy is supposed to grow to produce the lump sum you need to repay the loan in full at the end of the pre-agreed period, normally 25 years. Your monthly payments are made up of interest on your mortgage loan and the premium for the endowment. Within the package you also pay for life insurance which will repay the loan if you die. ~What is the big drawback? ~ That there is no guarantee that your endowment will pay off your mortgage. This is not the case with the traditional repayment method. ~What is the point of an endowment then? ~ An endowment MIGHT grow to more than you need to repay your loan, so giving you an extra bonus to spend on anything you like. But the world has changed dramatically against endowments so this is far less likely to happen nowadays. When they first became popular, in the early 1980s, inflation was roaring ahead, interest rates were high and you got tax relief on premiums paid to an endowment. So the sums worked in favour of endowment mortgages - they looked like great ways to repay home loans. ~What has changed? ~ Tax relief on endowment premiums vanished years ago and inflation and interest rates have fallen hitting investment growth. Many people are finding that their endowments won't produce enough to repay their loans after 25 years, let alone produce any hoped-for surplus. ~So why did people buy them?~ Because home loan firms, Building Societies and middlemen such as estate agents got large commissions for selling them. The charges are always 'front-loaded', so that most of the commission is paid up front and so for several years you will get little if anything back if you do have to stop paying the premiums. ~But how likely is this? ~ Statistically very likely. Only one in three endowments reaches their maturity date. The rest, for whatever reason are cashed in early - with the customers mostly getting
back less than they have paid in. ~So I need to keep paying the premiums? ~ The general recommendation is that you should. On average around half of the total payout on an endowment comes on the last day. This is the so-called terminal bonus*, which is not guaranteed, but makes up a large amount of the total payout. Stop paying in before then and you are likely to lose this. Instead, you will only get the benefit of the annual - or reversionary - bonuses which are added to your policy. However, many Insurers have now stopped selling endowment policies, and ?closed their books? on them. The likely implication for this is that, with no new policies being sold, future growth will be stifled, and you may be best just getting out ?either cashing in the policy, or making it into a ?paid-up policy?, so that you will collect a greater sum when the policy matures, whilst at the same time stopping any more premiums being paid. ~What if my endowment firm tells me the policy is not growing fast enough to repay my loan as planned? ~ Millions of people have been told this recently. Often people are advised to make extra monthly contributions to the endowment, though this can feel like throwing good money after bad. If your lender says you need to pay an extra £50 a month, for example, you could pay it into an ISA instead and use the money you make there to top up any shortfall produced by your endowment when your mortgage matures. The Gee Family Experience From our experience with the Nationwide Building Society in 1996, I would, however reckon that ALL Endowment Mortgages were being blatantly miss-sold then. It was back in 1996 when we bought a flat for our elder daughter to use whilst at Edinburgh University for her 4 year course. This was bought in her name and we had decided to put down a deposit of up to £40,000. Thus, getting a mortgage in her name for up to £40,000 was never going to be a problem and there was no way that w
e were going to pay any finders? fee or commission to a broker to produce a good mortgage option. We examined the various options that were available, and decided that the Nationwide Building Society was worth a look. Our daughter had held an Investment Account at the local branch for at least 4 years, and there was (and still is) the potential for this Mutual to become ?de-mutualised?. If this does happen, then that will be giving her a second tranche of shares. So when we had decided which property we were buying (purchase price £74,000) we toddled down to our local branch. With such a large deposit (£34,000), we were received with ?open arms?, a mortgage offered immediately and we were told of all the benefits that we were ?entitled? to. I had already decided that we would use a Building Society Repayment Mortgage (tax relief was then still available) with the mortgage in our daughter's name. The Manager confirmed that there was no objection to rooms being let out in the flat, but insisted that Heather & I would have to act as ?guarantors? in view of our daughter?s lack of regular income. That was not a problem, but there was a little legal expense in drawing up a document agreeing to this. An interest rate of 1.25% was charged for the first year, the valuation fee that we had already paid was refunded and a cheque for £350 was also given to our daughter to help with the legal fees at the conclusion of the business. Oh happy days!!! My only criticism of the Nationwide was the vehemence with which they pursued us to try and get the mortgage agreed as an Endowment Mortgage. After the Manager had agreed the mortgage of £40,000, in principle, he insisted that we must see the Branch?s ?Financial Adviser? (?Jill?) and an appointment was made for the next afternoon. Here we anticipated a hard-sell on the Society?s insurance policies. We had already decided to use the Nationwide Buildings Insurance (because with room
s let out to other students, which the Manager had agreed to, this would eliminate any problems with claims should the really unfortunate happen). We had also decided to go for a ?critical illness? insurance policy for the debt (for which we would ?shop around?). Under NO circumstances would an Endowment Mortgage have suited. There was no intention of allowing the mortgage to go for the full 25 years term - the time could have been as short as 4 years. and unlikely to be more than 8 years (this allowing for our son to attend the same University of Edinburgh for a 5 year course). Our daughter then had plans of working abroad when she graduated (and still has for when she qualifies as an Accountant), so she would want complete financial flexibility. We explained all this, but did this discourage this ?Jill?? Not in the least!! She continued to ?recommend? the Nationwide Unit Trust based Endowment plan as our ?best option?, claiming a ? conservative 6%? annual appreciation for the units, and producing figures which would show a marginally cheaper monthly payment over the repayment mortgage. She used the (middling-but-still-good) performance of this plan over the previous 12 months to demonstrate its ?effectiveness?. When we politely refused to be drawn to this particular ?plan of action?, she asked ?Why not?? ? In other words demanding us to justify our decision. Our daughter is quite adamant that if I had not been ?pulling the strings?, then she would have accepted the sales-pitch and signed up to an Endowment-linked plan. We were left with the distinct impression that this "Financial Adviser" was suggesting that we were some kind of idiots for rejecting this option. With the commission on the policy being ?retained? by the Nationwide, PLUS the regular payment of interest on the FULL AMOUNT of the loan, it was no wonder the Building Society was ?pushing? this option I went to the extent of complaining a
bout her behaviour to the Nationwide Head Office after the mortgage was in force, pointing out that we had already explained the circumstances under which we were taking out the loan, and that there was no way that an endowment mortgage would have suited our daughter?s personal circumstances. All only got denials from the Nationwide, saying that their Financial Advisers were only ?presenting the options?. ~ISA Mortgage Anyone?~ Now the ploy is for an ISA mortgage, and I reckon that this could be the next miss-selling disaster. Indeed, our younger daughter has a mortgage agreed, in principle with the same branch of the Nationwide Building Society. It is interesting to report that since she has had an account with them since before the bar was introduced on a new member of the society getting shares in the event of a de-mutualisation, then if this does happen, then (to her delight) she will get shares as both an investor and as a borrower. Good News that! Anyway, when she received her ?personal quotation?, there were two sets of figures given. One for a Repayment Mortgage, and the other for ?interest only? payments. When I queried this with the Manager, he confirmed that our daughter would be obliged to have a meeting with the Branch Financial Advisor (the same ?Jill? again!!!) to discuss ?payment options?. ? Not an Endowment Mortgage surely?, I said. ?No, not Endowments ? have you heard of ISA mortgages?? I played along, and he produced figures based on a 6% annual return, to show how much more effective an ISA Mortgage would be. Now, if he could tell me that the performance of that fund had shown such appreciation over the past 6 years? I await, with baited breath (and a hidden tape recorder), the meeting with Jill again. As it is, when our elder daughter sells the flat next year, a total of over £7,000 of the mortgage will have been paid off. There is no way that the Endowment policy that the Nati
onwide was wanting to sell us would have had a surrender value remotely approaching that figure. Some might call it ?Good Luck?. We know that it was ?Sound Judgement?. We hope that you can learn from this lesson when you take out your next home loan. ~~This opinion was donated to the FORCHARITY account by Sidneygee. To read more about this initiative, go to the FORCHARITY profile page and all will be explained!~~
Which? and Consumers' Association have created a website to help the estimated 5 million people that may have been mis-sold an endowment mortgage obtain financial compensation. http://www.endowmentaction.co.uk/ Thousands of people who were mis-sold an endowment have obtained compensation through the formal complaints process. This site will assist you by helping you write your letter of complaint. Grounds for complaint. You have grounds for complaint if your advisor did not make sure that an endowment mortgage was suitable for you or advise you of the risks involved. Were you told of any other options that were available. Were you told that the endowment policy was guaranteed or would definitely pay off the mortgage or even give you a lump sum as well on maturity of the endowment policy. You can also complain if your endowment mortgage was expected to run beyond your expected retirement age. You will require two numbers i.e Your endowment policy number and your mortgage reference number (account number)
If you hold an endowment mortgage, there is a reasonable chance that you have had a letter from your life assurance company suggesting that it may not succeed in getting the returns on your money required to repay your loan in full. Even Standard Life, who in 1999 issued a guarantee that all policies would mature to a level high enough to repay the mortgage covered by the policy, are now admitting that this is a promise they cannot keep. So, what can you do about it? Firstly, it is wise to establish that you were sold the policy correctly in the first place. Examples of mis-selling vary, but policy terms that take you in to retirement, sales to single people with no dependents or simply failing to explain the potential risks that a policy does not guarantee mortgage repayment could give you a case. If you bought the policy after 1988, the Financial Services Act should protect you. Even if you bought the policy before then, many companies will consider your claim in the same way. What are you entitled to? Well, this will vary from individual to individual. Effectively, you should approach the life assurance company first and ask them why the policy was sold to you. They should hold documentation supporting the sale. If this documentation stacks up, your case is likely to fail. But if the reasons for sale are not made clear (very possible if a salesman didn't do his paperwork properly) the life assurance company may well compensate you in a way that effectively returns you to the position that you would have been in had you taken a repayment mortgage. One thing you cannot get compensation for is, however, poor investment performance. Assuming the salesman made you aware that the value of a unit-linked plan could go up or down (or that a with profits plan is not guaranteed to meet its objective) it is highly unlikely you will be compensated. Irritating, given the wonderful graphs and tables of past performance
you were shown. Infuriating when you work out how much of your money has gone to pay the wages of the salesman and a fund manager who could have got better returns sticking your money in his own bank account earning 0.1% interest! Okay, assuming you were sold the policy correctly but the fund performance looks to be inadequate what choice do you have? Well, you could sit tight and hope for the best. After all, markets go up and down and past performance has still produced great returns. Personally, this is leaving a lot to chance and you really do not want to get to year 25 of your home loan and still have several thousand pounds owing. Unfortunately, facing the situation and finding more money each month to deal with this issue is probably the best solution. You could, as the life assurance company will probably suggest, increase your premiums to the life assurance policy. While based on past performance this should be a good idea, there is more than a feeling that you could be throwing good money after bad. A similar alternative is to take out a separate investment plan such as a regular savings stocks and shares ISA while retaining existing contributions to your endowment plan. While this is very reliant on stock market returns, those considering the stock market to be low but volatile will often recommend that you invest a little but often. So, £50 a month in a CAT standard product (such as M&S, Halifax or Abbey National) is an option. Again, my gut instinct is away from this. Times are uncertain and I am looking for guarantees. Perhaps the best option available is the most expensive one too. But certainly the one to go for if you can afford it. Keep your endowment policy going as a completely independent form of investment and life cover and switch your mortgage to a full repayment basis. Although your monthly payments will rise significantly, you have a guarantee that your mortgage will be fully repaid i
f you maintain the payments or die! Additionally, any proceeds from the policy at maturity are yours to spend as you wish. For many, it will pay for children to go in to higher education. The choice is yours. There is a half way house that works on the same principle. If you have, for example, a £50,000 endowment loan and a letter saying your policy may only mature to £40,000, you could switch to a part endowment / part repayment mortgage. In other words, increase your monthly payments to a level that will reduce your debt to £40,000 at the end of the term and let the endowment policy take care of the £40,000. This is more affordable than the option above and while it still relies heavily on the performance of the policy, you are certainly offsetting many of the risks involved. The level of reliance on the policy is best decided by finding the balance between the expectation you have from the policy and the needs of your wallet. Many will go half and half, in other words £25,000 endowment and £25,000 repayment, based on this example. Again, these options may not be suitable for you. You may need to give up on the policy altogether. Please do not take this decision lightly. Those who make most from endowment plans are those who keep going to maturity. But, if needs must, you have choices again! Whichever choice, ensure you switch your mortgage to a repayment basis! Those who forget to might not realise their mistake until year 25 is reached! You could surrender the policy to the life assurance company and get a lump sum back. This will usually be poor value, as charges and commissions have been deducted from the plan, a problem compounded by poor returns. But, you can then consider what to do with your lump sum. Ideally, reduce debt. This is what you took the policy out to do. So any proceeds should be used to pay off other credit. If you do not have any, reduce the mortgage! While you still have the option of a visit t
o the Trafford Centre for a wild shop, it really is not a good idea! And do not forget to arrange replacement life cover if you need it. If your surrender value is more than £2,000 and you hold a with profits policy, you could sell it. Check Channel 4 teletext money pages (index P490) for details of companies that trade endowments. You can usually attract between 10% and 30% more than the surrender value, so it is worth the effort! Again, do not forget to sort out new life cover now your existing policy has gone. A rarely used option is to make the policy paid up. This is a way of stopping your premiums now, but retaining a reduced level of investment and life cover. In other words, you still get a lump sum at the maturity date, albeit for a significantly reduced amount. What you will not get is a surrender value now though. You will still need to arrange additional life cover if appropriate, but at a lower level as your existing policy will still provide some protection. This is probably preferable to surrender in most cases. Are there any other catches? Well, your mortgage lender may charge a fee, typically £50, to amend your loan. Personally, I think this is a disgraceful approach, profiteering from the advice of a broker who place business with them, or from the advice of their own staff. If they do want to charge a fee, ask them to waive it. If they refuse, threaten to remortgage. Perhaps you should remortgage anyway and use the savings made to help reduce the pain! There is no great solution to the problem. Bury your head in the sand and do nothing or dig in to your pocket and find more money each month. In a perfect world, take independent financial advice on the matter. Alternatively, go directly to your mortgage lender and ask them for guidance. While they may not give specific advice, they should be able to clarify your options, backed up with specific costing for each course of action open to you.
Just bewar e any attempts to sell you top up policies! Good luck.
There are many types of Endowment policy, the ones I talk off are low cost or easy start - these are where the premium would be increased gradually over a specific amount of years. I have been exposed to only these policies & the details I will give refer to them (even though most policies have the same rules) Some policies have a guarantee that they will hit the target....if you go ahead with all recommendations! Here are some helpful terms. Basic Sum Assured - This is an amount the insurance company puts into a pot to gain your bonuses on every year. This amount is what will gain the full amount required to pay off your mortgage, if it's connected. Guaranteed Minimum Death Benefit: This is the amount you will receive in the event of death (same as your target amount) Reversionary Bonus: This is an amount the insurance company will add to your policy yearly, you will get an annual bonus statement. These bonuses are not guaranteed & are decided on by the performance of the company (around 2% of the basic sum assured + existing bonuses) Terminal Bonus: This is an amount you will receive at the end of the policy, this can be quite large, can give you a surplus & is tax free. Once again at the discretion of the Insurance company. Surrender Value: This is an amount you would receive if you wish to surrender your policy. In the first few years the surrender value will not even match what you have paid in. The first few years premium will go on costs of setting up the policy, life cover etc. You can also receive projected surrender values. Making a policy Paid Up: This is when you no longer wish to make payments to the policy but also wouldn't want to lose a lot of the money you have paid in. You can ask the insurance company for a Paid up quote. They will recalculate your Basic sum assured & the policy will continue to earn bonuses to the maturity date. The insurance company would p
roject an amount they think you may receive. The life cover element may also reduce or stop completely. REVIEW CLAUSE Some policies have a review clause which means that the insurance company will review the policy & you have to increase the premiums to keep the policy qualifying (there would be tax implications otherwise - this may affect you more if you have a larger income, worth checking this out before you do anything) If you decided that you didn't want to increase the review clause would be removed meaning that they would not be obliged to review your policy again & you may be even more off track at maturity. GUARANTEE Some policies have a guarantee that you will meet the target amount.....if you go ahead with all their recommendation, which could mean any number of increases - the premium will never decrease. There is also the 10 year rule. In the last 10 years of the policy any increase has to be done - no authorisation is needed. If you decide to decline this the guarantee would be lost & no more reviews would take place - tax implications may also apply. It's not usually beneficial to surrender a policy (you can sell them for slightly higher than the surrender value as some companies buy them - remember you will still be a life assured on this!) but the best thing to do is get proper financial advice. If you took your policy out from 1985 or later & have not had a review it would be worth asking for a projection of these (a policy that has a review clause can only be reviewed on it's anniversary - so a projection is good in the meantime, otherwise they will remove the review clause & the guarantee - if it has one) On a last note there are also Unit Linked policies these are linked to certain funds. Examples, secure fund, managed fund, equity managed fund etc. You decide the fund you want these to be invested in. Best to check as some people are sold these & not told that they can
switch funds a certain amount of times each year for free! They end up having the whole 100% in a low risk fund that doesn't give good returns. Check this & go through the funds with your financial adviser & decide how risky you want to be, you can split them so you could have say, 50% in a secure funds 25% in a managed fund (medium risk) & 25% in a high risk fund. you have to pay close attention to these & it may be worth asking for the funds performance over the last 5-10 years before you choose. I hope that wasn't too long & boring (I have a terrible feeling it was!!)
This op explains the differences between endowment mortgages and repayment mortgages. It does not aim to recommend one over the other, simply to ensure a clear understanding so that a fair and rational decision can be made. This op is necessarily long, but hopefully valuable. First I will explain the key features of repayment and endowment mortgages, then cover the important differences. Finally, I will give some advice for use when making a choice between the two. Note, for the moment i am assuming that interest rates never change. More on that later. Repayment: With a repayment mortgage your monthly payments are the same every month, but each payment has two elements, and these are constantly changing. First, there is the interest. At the start this is a huge amount. On top of this is a small amount that pays off part of the loan. The next year you owe slightly less, so the interest part of the loan falls slightly. This means that more of the payment goes towards reducing the loan. So another year later the loan has fallen by slightly more, the interest falls by slightly more, and again, slightly more goes towards reducing the loan. Its a virtuous circle. On a £50,000 loan at 6% interest, the payments are £325.94 a month. In year one the total payment is £3,911.34 (325.94 x 12). Of this £3,000.00 is interest and only £911.34 pays off the loan. In year 2 you pay the same amount, but this time only £2,945.32 is interest, and £966.02 goes towards reducing the loan. By year 5 the interest is only £2,760.80 and the "capital" is £1,150.54, and in year 10, its £2,371.65 capital and £1,539.68 interest. After that the interest element falls at an ever faster rate and therefore the capital element increases faster, meaning that the loan is accelerating towards zero. By year 20 the interest is only £1,154.00 - remember it was £3,000.00 in year 1. At the
end of year 25, the loan is zero and you finally own your house. Sorry if im getting a bit numerical, but trust me its worth it! Okay, now for the alternative... Endowment: With an endowment mortgage there is a key difference. You do not repay any of the loan as you go along. Its worth repeating. You do not repay any of the loan as you go along. This means that the interest is the same every year (remember, we are assuming that interest rates stay the same). For this illustration we will assume that the return on investments is exactly the same as the interest rate on the repayment mortgage example - 6%. If this is the case, your monthly payments are exactly the same. In year one you pay £3,911.34, just as you did with the repayment mortgage. The interest is £3,000.00 (thats £50,000 x 6%), and there is £911.34 left over. This is invested for you. In year 2, you the same thing happens. Another £911.34 is invested, but you already had £911.34 invested and this earns 6%, which is £54.68. So at the end of year 2 you have a total of £1,877.35 invested (£911.34 x 2 plus the return of £54.68). In year 3 that £1,877.35 money earns a return of £112.64 and you add another £911.34 to it. And so it goes. The fund keeps growing due to both the extra £911.34 you put in every year, and the return on the investment. By year 5 the return is £239.20 and the total fund is £5,137.29. By year 10 the return is £628.35 and the fund is £12,012.13. The value of the fund accelerates as each year there is more money to earn a return on. In year 20 the return is an impressive £1,846. This is twice the amount that you are paying in yourself, so the money is really working on your behalf. At the end of year 25 the fund is worth exactly £50,000. This is used to pay off the loan of £50,000, which stayed at the same value all along. And you own your home at last. <
br><br> So, there you have it. There is no difference between repayment and endowments. At this point you say to me, "hang on, i thought there were some issues with endowments." Indeed. And here they are: 1. Rate of return Investments earn a higher rate than normal interest rates in the long term. Time to be repetitive again. IN THE LONG TERM. Returns on investments vary all the time. The past couple of years have been a bit tought for stock markets and endowment investment could have actually shrunk, but over a period of 25 year, investments will almost certainly do better than normal interest rates. Lets assume that investments earn 2% more than interest rates. In my example this would be 8%. In such a case the monthly payments no longer need to be £325.94. You will manage to amass the £50,000 paying only £306.99. Thats £18.95 less a month, or £5,684.92 over the full 25 years. Seems like a bargain. Whats the catch? 2. Unpredictability We are pretty sure that the endowment will earn a better rate than normal interest rates. But we dont know by how much. If it is assumed that the endowment will earn 2% more, your payments will be £306.99, but nothing is guaranteed, and looking ahead 25 years is quite tricky. When you take out the policy, returns might be 8%, but if they fall to say, 6%, you will end up with less than you planned, and might not have enough to pay off the mortage. Also, while the market on average may have a return of 8%, this is only an average. Different financial institutions will have different results. Its not possible to predict in advance which will perform best. See Mis-selling below. 3. Interest Rate Changes When interest rates go up, the amount of interest you pay goes up. And vice versa when rates go down. If you have an endowment mortgage the change will apply to th
e whole amount of the mortage (because the loan stays the same throughout the life of the mortgage). If you have a repayment mortgage, the value of the loan has been falling as you make payments. Therefore, the later in your mortage you are, the smaller the effect of the rate change. But now for the crucial part: Interest rates and investment returns are broadly linked. If interest rates are falling, the returns on the endowment policy will fall. So if interest rates fall by 1%, the endowment returns could fall by 1%, and therefore the value of the policy at the end of the mortgage will be lower. As a result, if rates are falling, you should put some of the saving you make from lower interest payments into higher payments on the endowment policy. This is what has caught so many people out in the last few years. Interest rates used to be around 10%. Now they are around 6%. This makes mortgages more affordable in terms of interest payments, BUT IT MEANS THAT YOU HAVE TO PAY MORE FOR YOUR ENDOWMENT POLICY IN ORDER TO ENABLE YOU TO PAY OFF THE LOAN AT THE END. If interest rates rise, you could end up with more in your endowment fund than you need. Which is nice! But, you cannot reduce the payments into the policy as a result. You will only get your hands on the extra at the end of the mortgage. 4. Mis-selling It is certainly true that financial institutions are a touch economical with the truth. They will sell the benefits of endowments (eg cheaper than repayment mortgages), but will forget to stress that the returns are not guaranteed. They will also neglect to mention that falling interest rates can jeopardise the final value of your endowment policy. The law sets outs standard for projecting the value to endowment policies when selling them. Standard rates of returns must be used in illustration. But these are only illustrations. The Financial Institutions will also
show you past performance figures to show how good they are. Not surprisingly they choose a timescale that shows them in the best light. If ABC Investments Ltd has achieved a return of 15% a year for the last 3 years, but only 5% a year over the last 10 years, guess which they will show you. Whatever the past performance, it does not mean that this will continue into the future. A further complication - the financial adviser, or mortgage adviser, might only be able to offer you a limited range of products (a tied adviser), or may offer you the whole range of products available (an independent financial adviser, or IFA). IFAs have a legal obligation to consider all products available and recommend the best for your circumstances. Tied advisers DO NOT. 5. Life Insurance Endowment policies typically include life insurance. This will pay off your mortgage if you die. Repayment mortgages do not include life insurance, but you will need to take some out anyway. Therefore, when comparing costs, make sure that you are comparing like with like. If the endowment policy included life insurance, you need to add the cost of such insurance to the cost of the repayment mortgage. 6. Charges Investments have costs. There is the dealing cost of buying and selling shares, and there are fees for the investment managers. The bulk of the fees are usually charged in the first few years, so the amount being invested is less in these years. Illustrations of endowment policies include these fees, so you down really need to worry about them. Are they a rip-off? Yes and no. Someone does need to manage the investments, and transaction charges for trading in shares are real. The catch with endowments is that the charges CAN be quite high, and within those charges there might be commission for the person trying to sell it to you. If the financial adviser at the bank will get more commission f
or selling you an endowment mortgage than a repayment mortgage then he/she MIGHT be tempted to mislead you. 7. Redemptions If you end an endowment policy early, you will usually be stung badly with charges (not least because the fees are often wieghted towards to early years). Endowments are long term investments and only work in the long term. If you move house it is usually far better to continue with the existing endowment than to cancel it and set up a new one. If you are increasing the mortgage when you move, take out another endowment for the EXTRA amount. So, where does this leave us? Repayment mortgages pay off the loan over the specified life of the mortgage. If interest rates vary, the monthly payments vary, but the loan will still get paid off. Endowment mortgages AIM to pay of the loan at the end of the mortgage. But it is not guaranteed. You could end up with a nice lump sum left over after paying off the loan. Or you might end up with a shortfall. Repayment mortgages are certain. Endowment mortgages are uncertain, but potentially cheaper. When taking out a mortgage, and making the choice between repayment or endowment, pay heed to the following: 1. Understand the differences between repayment and endowment at the outset. 2. Understand you own attitude to risk. If you want complete certainly that your mortgage leaves you with nothing owing at the end, then your decision is made for you. Repayment mortgages = certainty. 3. Find out whether your adviser is tied or independent. 4. Find out how much commission the adviser will receive for selling you different types of mortgage. If you think the commission is excessive, dont deal with them. Its your money that pays the commission! 5. Ask for everything in writing. Advisers may say all kinds of positive things, and will make hints that you may interpret as
statements. Ask for details in writing and then read them carefully. Its only the written statements that you can rely on. 6. Past performance is no guarantee of future returns. 7. Remember that if interest rates fall, you might need to pay more into the endowment policy in order to have enough at the end of the mortgage to pay off the loan. To be safe, use the saving in interest to pay more into the endowment. Find out if there is a facility to increase payments. 8. If interest rates rise you might end up with a windfall, but only at the end of the mortgage. You cannot reduce your payments to take advantage of this. 9. You cant really pay too much into an endowment policy. Any "overpayment" will simply result in a larger fund at the end, and could result in a nice windfall. Of course, the windfall is locked-up until the end of the mortgage. 10. Keep all paperwork in a file. If at a later date you think you have been mis-led, review what you have. If you arent sure go back to the people who sold you the mortage - they do have a duty to explain themselves. Finally, you do not necessarily have to choose between one or the other. There is nothing wrong with having 50% of your mortgage as repayment, and 50% as endowment. I hope this op has been useful. Buying a home and taking out the related mortgage are the biggest financial transactions most of us will ever enter into. Eyes open, brain engaged.
Being a first time mortgage customer, never moving mortgage or house since our first. I am discusted with the mortgage banks, just before Christmas we received a letter saying that it is foreseen that next year our endownment policy for our mortgage will be running at a deficit. Panicing we went down to our bank - the Abbey National and asked them what should we do, is it possible to swap to a repayment mortgage, they advised us that we would stand to loose a lot of money switching to a repayment mortgage and that we should either up our payments into the morgage or open an ISA and pay in £60-80 per month to cover the shortfall and that each year we could pay off a section of the mortgage. Nievely we did as they advised. In May our friends saw an Independant Financial Adviser, they gave him our number. We met with him, and that meeting really openend our eyes. The only problem with him came a fee and he was most aggresive towards me when we decided not to use his services. We made a list of what we wanted an dhow much we were paying out now. We had 18 years left ot pay out (from 25 years). We were in a penalty clause as we had 18 months left on a fixed rate. We wanted to be able to keep paying the endownment side of the Abbey National mortgage. we still only wanted it over the years left - 18. We found out the penalty cost and added it to the figure. We then phoned around 6 financial companies, from banks, building societies to small financial companies, from which I recognised their names, ideally we wanted a financial company where if there was any problems, there was a branch we could walk into. We found a repayment mortgage with Barclays bank. The morgage was cheaper than we are paying now by £80.00 per month still over the 18 years left with no risk of endownment paying off. We can still keep our endownment with Abbey National so that in 18 years not only will we have paid off our mortgage but we will have a nice
pay out aswell. It is wise to seek advise, but I wouldn't pay for this service as you can do it simply by yourself. Unfortunately we have lost the last 7 years of money but we decided it was better to cut our losses now rather than receive them later. There are many sites on the Internet that explain mortgages and some offer services for minimum amounts ie: £10.00 if your not confident in doint it yourself. Good luck in your findings.
Once upon a time there was a fairy princess. She had kissed many frogs in her time but at long last her handsome prince had come into her life. As time passed, they decided it was time to have a home of their own and buy their very own enchanted castle. Unfortuantly, things were a bit tight in fairy land and so a mortgage was called upon. The prince and princess decided that the mortgage and the deeds should be in joint names so then things would be equal between then. Within no time at all they had moved into their beautiful new home and so soon settled down into their blissful lives. Unfortuantly for the princess, things started to go downhill and it turned out that her handsome prince was indeed just another frog. The prince and princess decided it was time to go their seperate ways and so they made an agreement. As long as the prince paid to have the princesses name removed from the mortgage and the deeds, then the castle was his. The months passed and the princess heard nothing from the building society. She decided to call in and see how things were going. Unfortuantly the princess received a nasty shock. She was allowed to know anything to do with the money side of it but that was it. She wasnt allowed to know how far down the line the removing of her name had gone. Seven years have since passed at the princesses name still remains on both the mortgage and the deeds. This means that all the time this is the case, the poor princess will never be able to take on another mortgage. The poor princess had learnt her lesson hard......the world is full of frogs and very rarely do you truely meet your prince!! Ok, so I may not be a fairytale princess but this sad tale is true. I pop into the Halifax at various time only to receive the same comments. If a mortgage is in joint names then the two named people are responsible no matter who actually living at the property. This means that if my ex cant pay the
mortgage anymore, for whatever reason, the Halifax will chase me for the money, even though I have a family of my own to look after. The Halifax will not tell me anything to do with the removal of my name. This is because they look upon it as someone is applying for sole equity, so this is their business not mine. The Halifax have turned down sole equity because they deemed my ex as earning insufficent money for paying the mortgage. The fact that he has been paying this on his own for the past seven years seems to have escaped their notice! The only thing that I am legally allowed to do is to take my ex to court and force him to sell the house. Not a very pleasant thing to do to anyone plus the fact that it could cost me as much as £10,000. Lastly, for all those who are thinking that half of that house is mine so at least I will see some money from it one day.....well you are wrong. I have been in contact with a solicitor who has told me that although I am liable to pay the mortgage, it is very likely that I will never get a penny out of the house. My ex could (and Im sure that he would) take the matter further and because he has been paying for the mortgage for all these years and I havent, well this means that the house is infact his and not mine! I know that these laws were put into practise to proctect wives when mortgages were in the husbands name but surely something must be done to help people that are in a similar situation to myself. I dont want any money, or the house...all I want is for my name to be removed so the fear that the Halifax will come chasing me for money I havent got, will be banished forever!
Unhappy with the projected returns on your endowment policy? Complained about mis-selling? That won't improve the performance of your endowment. A lot of companies have reduced the bonuses paid - and this is the real scandal, not mis-selling. So get going, check out your policy statements and if bonus rates are low - COMPLAIN. Check with my examples, below. Apparently very few endowment policy holders have complained, probably because these are complicated long term products, made even more complicated by the obscure language used. Read this long message for details of how to compare your policy and if bonus rates are low, don't take it lying down. Don't wait until your policy matures to find out its been a shocker, check it now, check it every year, and if its bad - COMPLAIN. I have 5 (yes, five) endowment policies, all taken out to repay the mortgages my wife and I have taken out, to buy, build, etc - all on one house. Two of these, with Legal and General were taken out 23 years ago on our first house, and are doing OK. Three are with Scottish Amicable, now owned by the Prudential, taken out in 1985, 1991 and 1992. These are plumbing the depths, and I've had THE LETTER telling me that one (the big one of course) is not likely to return enough to repay the loan. So I started to look at these. Of course, there is the commission scandal, but its really only a minor part of the problem. The real scandal is the low bonus rates. I've had letters from both these companies explaining that with low inflation and low interest rates, returns have fallen. Nonsense, don't accept this drivel. I did not pay these companies to put my money into a building society, I paid them to invest in stocks and shares on my behalf and to manage that investment for me. Did you pay them to put your money into a building society? Of course not, we can all do that, for free. So the only yardstick to judge the performance by is the sto
ck market. According to the current issue of The Economist magazine (page 110), the long run real return earned by good pension fund managers averaged about 13% over the last 20 years. The long run return of the British stock market is about 9%, and the good managers have beaten this. So we should expect the same with our endowment funds, accepting a slightly lower return because we get life assurance too, as part of the deal. So now we know how to judge our policies over the long term - but how to assess them in the short term? What I did was to compare the bonuses paid over the years 1994 to 1999 - five years. But first a word about bonuses. In my policies there are three types of bonus. The first is the bonus on the sum assured, which is the amount of benefit (not necessarily the amount you are insured for - check your statement carefully). The second is the bonus given based on the bonuses already accumulated. These bonuses cannot be taken away. The third is the terminal bonus, paid out when (and only when) the policy matures. If you cash your policy early, no terminal bonus - you give it to the company. I added up the first two types of bonus, and excluded all special bonuses so that you can compare yours with these. The total bonus on the 'sum assured' for the Legal and General policies was 25.35%, but on the Scottish Amicable policies it was 19.0%. WOW!!. The total bonus on 'accumulated bonuses' allocated by the Legal and General was 12.85%, by Scottish Amicable, 11.0%. Guess why the Scottish Amicable policies are not doing well. Nothing to do with selling commissions, or with low interest rates. Its not that Legal and General are star performers either. According to their web site, 25 year endowment policies being cashed on March 1 2001 have given an average increase of 12.1% per year. Not bad - but inflation (RPI) averaged 4.6% over this period, so the real return was 7.5% per annum. But compared wit
h Scottish Amicable their bonus rates are great. What about other companies? I don't have data for bonus rates for other companies - but you do. Post it, lets compare. I've shown you mine!! There are also tables published each year detailing the returns on with profits policies - for example, in the Daily Telegraph on March 3, 2001. They listed 15 companies, but not Scottish Amicable or Legal and General. The best was Royal London (the return over 25 years) averaged 13.7%, so in real terms was about 9.1%. They managed to beat the average for stocks, and provided life assurance too, so well done lads and lassies in Royal London for your policy holders. The worst of the 15 - National Mutual. Their average return was 10.0%, a real return of about 5.4%. The average of the 15 - 12.3%, a real return of 7.7%, so Legal and General were very slightly lower than average - what hope is there for my (our) Scottish Amicable policies? So check your bonus rates. If they are not a lot better than mine write, email, phone COMPLAIN. Ask how the performance of your company compares with others. Ask what they doing to improve performance. Go to the AGM, stand up, ask questions, be awkward. They have to improve!!! Compare the projected return of your policy with advertisments for other products by the company, such as ISAs. You can bet these don't mention low interest rates, or low rates of return. Finally, why do these companies pay such poor bonus rates? Good question, and I don't know the answer, but I don't think its to benefit us. Some clues - the with profit fund managers make a charge on this fund every year - the more there is in the fund, the more money there is for their salaries, expenses, bonuses, etc. So when they give us a bonus, which effectively removes the money from the with profits fund, could it perhaps reduce the money available for their salaries? Secondly, for publicly quoted companies, they need to give div
idends to shareholders. I'd be willing to bet that over the life of our policies its better to be a share holder of these companies than to be a policy holder. This has been a long one, but hope its useful. Get your friends to check out their policies too, compare bonus rates - COMPLAIN. Get a ball rolling - lets get this scandal into the financial press, onto TV, etc, then maybe we'll get a fair deal for endowment policy holders.
****** UPDATE********** My endownment company have finally accepted defeat and have made up what the payments should have been. They have backdated them to when the policy started and will contribute for the rest of the term. We are the lucky ones,, we have our endownment company contributing to our monthly payments. If you are not happy with the performance of yours and it turns out to be their fault,, get on to them until they pay up!!!!! ******ORIGINAL OPINION********** In 1991, me and my hubby were first time buyers, and I guess you could say we went into the mortgage world rather blindly! We trusted the finacial advisor at our local branch of the Royal Bank of Scotland ,and took out an endownment policy to repay our mortgage. It wasn't until I decided to move house and re-evaluate my mortgage needs that I did a little investigating into my endownment policy! The results I was given were devastating to say the least!! It turns out that the monthly premium was far too low to reach the value of my out standing mortgage. I had been paying nearly £30.00 too little a month!!! I was advised that my policy was no where near target!!! Cry???? I nearly had a heart attack!!! They left it at that !!! I fought them with endless letters and phone calls of dissatisfaction and the appropriate threats!!!(as you do when you're ticked off!!) I am now happy to say that they are going to backdate these miscalculted premiums and make up the difference for then and for the remaining time left on the policy!! I know some people have not been as fortunate in their outcome with miscalculated premium endownments and have had to make up the shortfall out of their own pockets. So if you have an endownment with Royal Scottish Assurance give them a call now!!! If you have an endownment at all,, my advise is to keep hounding them every year to makesure everything is on track and h
opefully you won't be in for any nasty shocks. My opinion: DO NOT BUY AN ENDOWNMENT POLICY!!!! As it stands the risk factors are now over the odds, and this product should be abolished.