By Quintin Whitfield
Back in the 1980s word went around that there was a wonderful new way to pay your mortgage. In those days the process of getting and running a mortgage was almost sacrosanct, and little variation was available. A fairly common route to take was to open an account at the Building Society of your choice, and to put in as much money as you could, the intention being to prove to said Building Society that you were prudent and could be trusted with their money.
When the time for a mortgage arrived, it was best suit on for an appointment with the branch manager to convince him of your dependability, and if you were successful you were given a (typically) 25 year repayment mortgage. Inflation was your friend because you usually started off committed to a monthly repayment which made yours eyes water, but as time went by the real value of this dwindled in significance.
When you had completed your 300 monthly repayments the property was yours. It was all very straightforward until the endowment mortgage arrived. With this you paid only the interest due, with a promise of lower monthly commitment. At the end of the term a sum would be handed to you which would be sufficient to pay off the capital sum of the mortgage and leave you with enough to enjoy a brief excursion into the wild life of regular meals and even exotic holidays, which in extreme cases may even have been outside the UK!
That was the dream which was eagerly taken up by many hardworking mortgage owners and unfortunately, also by some over eager salesmen. The sum necessary to pay off your mortgage was not guaranteed, and in the majority of cases it didn’t. Therein lies the formation of the mis-selling scandal; many building societies took great care to explain to their mortgage customers the modus operandi of the endowment system and the many pitfalls which could trap the unwary. Tragically many individual salesmen and some building societies omitted to adequately cover some of the less palatable facts.
This created great distress in some cases; figures produced for 2004 show that almost 7 million endowment mortgages were unlikely to provide sufficient funds to pay off the mortgage debts, leaving less than 2 million which should achieve their objective. Thus the flood tide of the 1980s which saw home owners clamouring for endowment mortgages suddenly became an ebb tide, with endowment holders looking for a way of getting back to the old system, or to one of the newer but more reliable alternatives. Great caution is necessary in this situation.
First of all you need to look carefully at your endowment mortgage to determine its value. If you are still in the early years of its operation, you will find that despite your monthly payments you have a document with very little value. This is because you have been paying the premium for the endowment agreement itself, the interest due on your mortgage loan and life insurance to cover repayment of the loan if you should die before completion.
A very important factor in an endowment is the terminal bonus. You will have received the benefit of annual bonuses along the way, but the terminal bonus is normally the very high value one; it could well provide more than half the final value of the payment which you will receive, but will be lost if you cancel. To make matters more difficult, the value of the terminal bonus is not guaranteed and will not be known until the endowment is fully paid up. It may be that you are in the situation where you will lose money whichever route you take.
If you do decide to proceed with the sale of the endowment, either because you need the money or because you are in the fortunate position where sale would be advantageous, you need to shop around. Certainly you should obtain a sale figure from the company who provided the endowment in the first place, but you are also free to go into the market place for these mortgages and see what offers you can get. It is very likely that the price which you will be offered in this way will be better than that which the original issuer is prepared to allow you.
You will find that different companies have different criteria relating to which endowments they would be interested in buying. For instance, some will not be interested if the sale value is below a certain figure, or may require the endowment to have been operational for a specific minimum period. Realistically you should seek professional help in reaching a decision; a company which has contacts within the Association of Policy Market Makers (which represents companies who deal in endowment trading) will be better placed to find you the best deal. There will be a charge for their expertise, but you should benefit from a better price and save yourself a lot of time, work and worry.
Remember that if you sell your endowment mortgage, you will fairly certainly also be cancelling your accompanying life cover and should ensure that you obtain a replacement policy, preferably before the cancellation takes effect. There is little harm in duplicating your cover for a short time, but there could be very unfortunate results from even the shortest period without cover.
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Easy Repayment Are The Best Option For Borrowers
By Keri Carrillo
Secured loans - one of the most popular types of loan uses the home or any other property owned by the borrower as collateral. The borrower pledges his property to the lender for the repayment duration. Although there are numerous other types of loan, but lenders are most comfortable while giving a secured loan. The obvious reason for this comfort is the element of security or collateral. This collateral ensures a peace of mind for the lender because he has something to bank upon in case the borrower defaults. This security prompts the lenders to offer loans at low interest rates. Secured loans are panacea for people who otherwise would have faced a rejection due to their poor credit ratings or any other cause. Thus by offering proper collateral almost anyone can get the desired loan. Secured loans can be taken for a wide spectrum of uses such as debt consolidation, renovation of homes, funding a holiday or buying a new car.
The amount a person can get as a secured loan is dependent to a large extent on the value of the collateral. With proper collateral, secured loans of 5000 to 50,000 are easily available. However, if the lenders feel that the collateral is of sufficient value and the borrower has a good credit history, they do not hesitate in lending large amounts. Secured loans come with very easy repayment options and lenders keep borrower’s requirements into consideration while deciding on repayment plans. Secured loans have repayment periods stretching from five to twenty five years.
APR (Annual Percentage Rate) should be given serious consideration by every borrower who wants to take a secured loan. The APR is the interest rate charged on the loan. Secured loans have very low APR’s ranging between 5% to 8% depending on the loan term, collateral value and credit worthiness of the borrower. While taking a secured loan a borrower has to pay some fees to the lender. The lender has to ensure that the collateral is of sufficiently high value. For this purpose he takes the help of a professional valuator. This professional engagement has to be paid by the borrower. The solicitor’s fees are also charged for preparing legal documents. The conveyance and office charges also add up the cost of taking a secured loan. The borrower should be aware of all such fees and ask the lender about it in advance.
The process of applying for a secured loan has become very easy and hassle- free thanks to the modern advances in information technology. All the leading financial institutions and top of the line lenders have online presence these days. It takes just a few minutes to submit an online application via the lender’s website. A borrower can also apply through a phone and by visiting the lender’s office in person.
Since a valuation process is involved in taking secured loans, the approval of such loans take a longer time as compared to unsecured loans. Lending agencies, in spite of having collateral will like to ensure the borrower’s creditworthiness. For this the lenders take the help of existing credit rating agencies. Most of the lenders take explicit permission from the borrower before performing any credit check. The entire process from submitting the application form for the secured loan to loan approval will be completed within 30 days in most cases. A credit agreement will enforce the terms and condition of loan on both parties- the lender and the borrower. It would be a wise decision if a borrower goes through the fine print of this agreement to avoid falling into any trap, which might be detrimental to his financial and other interests. Shopping around for the right lender with the most economical offer and the lowest APR will save a fortune for the borrower.
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