Personal Finance: Endowments in the doghouse
Mortgages: as property price rises slow and special offers proliferate, we show how to choose a deal that meets your priorities - be it
Sunday 13 September 1998
Alternatively, you could take out an endowment mortgage, where you just paid interest on the loan and used the proceeds of an endowment - a with- profit life assurance policy - to pay off the capital at maturity.
Both had variable interest rates that moved up and down as lender rates changed.
Now it is much more complicated. Almost half of homebuyers choose a repayment deal, but are then faced with a choice of interest rates, including fixed- rates, discounted and capped deals. Only three out of 10 new mortgages are now endowment-backed.
Buyers are also shunning PEP mortgages, which allow you to pay interest on the loan and save for the capital repayment through a stock market investment."I can't remember the last time someone took out a PEP mortgage," said Siobhan Hotten, at John Charcol, independent mortgage advisers .
Repayment mortgages are popular because they are straightforward. After 25 years, your debt will be paid off.
Most of these loans are also "portable" so you can take the loan with you when moving house- although it is possible to start a new 25-year loan when you move house. Some people do this to keep their repayments down, but it does extend the term of your loan.
Many lenders, including Bank of Scotland, Legal & General and Sainsbury's, now offer flexible repayment mortgages that let you pay in lump sums or extra money each month to reduce the debt. You can cut several years and many thousands of pounds off your mortgage this way.
Be aware that a few lenders will only issue repayment mortgages for one property, so you cannot take the deal with you if you move. Mortgage Trust is one such lender. Check the small print carefully.
Interest-only mortgages can be transferred when you move, but an endowment policy may not provide enough money to pay off the capital at the end of the loan. Ms Hotten believes there is still a case for endowments: "The contracts are much better now. They provide valuable life cover and are quite often packaged with critical illness cover, protecting you if you are unable to work."
Contact: John Charcol, 0800 718191.
- 2 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 3 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 4 Cee Lo Green: It is only rape if the victim is conscious
- 5 Nigerian witch-finder Helen Ukpabio threatens legal action against human rights organisations
Perez Hilton apologises for publishing Jennifer Lawrence naked 4Chan photos
Emma Watson on Jennifer Lawrence naked photo leak: 'Even worse than seeing women's privacy violated is reading the comments'
Ariana Grande nude photos leak: Pictures are completely fake, say representatives
Saudis risk new Muslim division with proposal to move Mohamed’s tomb
Kate Upton nude photos leak: Model's spokespeople 'looking into' authenticity of indecent images
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ashya King: 'Cruel NHS has not given us the treatment we need', says father of five-year-old with brain tumour who fled to Spain
iJobs Money & Business
£30000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Front-Of...
£700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...
£700 per day: Harrington Starr: Java/Calypso Developer Java, Calypso, J2EE, J...
£500 per day: Harrington Starr: SQL Developer SQL, C#, Stored Procedures, MDX...