Chances are you’ve heard of an endowment mortgage, but you’re not quite sure what it is. Nowadays this unique type of mortgage is in the news everywhere and is receiving a bad rap from many people. So what’s the truth about an endowment mortgage, and how does it really work?

Endowment mortgages can be somewhat complex, although the system behind them is simple. They work in two parts. On one hand, they are a simple interest-only mortgage, and are treated as such. The borrower pays interest on the mortgage to his lender, and any terms that can apply to a normal mortgage are applied to these interest payments, including capped rates, fixed rates, variable rates, and any other special incentives the lender may offer. However, the borrower is not paying off his mortgage with these payments, as he would be with a typical mortgage: He is only paying the interest.

The mortgage itself is paid separately, and only at the time it ends. During the term of the loan, the borrower makes separate payments into an endowment fund. This fund is invested in stocks, shares, and life insurance, and allowed to mature throughout the term of the mortgage. At the close of the mortgage term, the endowment is cashed in to pay off the mortgage.

The downside here is obvious: If the endowment investments don’t do well, then the endowment will not pay off the total balance, and the homeowner will still be responsible. Today’s extremely low interest rates and sluggish stock market have turned some people away from the idea of endowment mortgages.

However, there are advantages to this unusual type of plan.
Throughout the years of your mortgage, your monthly payments remain low (only the cost of interest) and will not be a strain in your income. The money you set aside for your endowment is, essentially, working for you; regardless of how well the market performs, chances are good that you will get back more than you paid in. Also, lenders that offer endowment mortgages offer borrowers a few escape clauses. If your endowment is in progress, and the stock market is doing poorly, you may be given the option to opt out of your endowment and invest your money instead in an additional savings plan which accrues interest on your payments. It won’t gain you as much as an endowment potentially could, but it will protect you against poor investment performance. Most lenders will also allow you to switch your entire mortgage, or just the amount of the projected shortfall, to a standard repayment mortgage.

For the financially organized, endowment funds can be a great way to pay your way through owning a home and come out clean on the other side. With an endowment mortgage, just as with any other investment, it pays to keep a close eye on your cash.

Joseph Kenny is the webmaster of the loan information sites http://www.selectloans.co.uk/ and also http://www.ukpersonalloanstore.co.uk.

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Are you a pensioner applying for a loan? Here are 5 things you should remember

As a pensioner, applying for loans and finance can be problematic. Some of the best deals in the market may be unavailable to you because you do not meet the ideal criteria that lenders look for. For example, because of your situation you may no longer be able to generate income. To make up for this, you need to make sure that other aspects of your loan application are presented strongly to allow you to obtain the loan most suited to you.

Your age may make you a credit risk

In general, the main thing that lenders consider when reviewing a credit application is risk. Your credit history, income and age may all point to you being a high credit risk and lenders may consequently decline your application. Because of these factors, senior citizens and pensioners may experience greater difficulty in obtaining a loan. However, if you can show that you are able to service your loan for the duration of the term, or even prepay the interest, you still have a good chance of succeeding in your application.

You need to demonstrate loan serviceability in your application

Regardless of your age and employment status, the main thing you need to show is that you can actually pay back the loan you wish to take out. If the lender decides that you will have no difficulty making the scheduled repayments for the term of the loan, you will probably be successful in your application. Any information you can provide regarding your assets and income will obviously be relevant.

Being an existing homeowner may help your situation

Even if you have strong income as a pensioner, a number of factors such as illness or hospitalisation may affect that income and lead to financial difficulty. If you are a homeowner, you may be able to access any funds or equity in your property to secure the loan and convince the lender that you can meet the proposed repayments for the term of the loan.

Non-standard loan facilities may be difficult to obtain

Line of credit mortgages, some long-term fixed-rate mortgages and mortgages that offer payment breaks are all innovations that have appeared in the mortgage market in recent years. Unfortunately, many of these mortgages may be unavailable to pensioners. Lines of credit, for example, which allow the homeowner to take equity out of his or her home, present greater risk to a money lender because of their potential to extend the loan period and create more opportunity for default. Because pensioners may already be considered high risk, it is unlikely that these financial products will be available.

You may be required to apply for loan insurance

Depending on your circumstances, you may wish to obtain loan insurance. This ensures that your loan repayments are met in the event of involuntary unemployment, injury or death. Although the premium may be higher than average due to your status as a pensioner, a lender may nevertheless require you to obtain loan insurance before approving your application.

Nick Cameron is a writer for Australian Debt Reduction which is part of Australia’s largest Debt Relief organisation and has assisted more than 10,000 Australian’s reduce their debt. You can read more articles and find out more about how to reduce your own debt at http://www.australian-debt-reduction.com.au or by calling 1300 306 272 from within Australia.

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If you owe monies to several lenders are finding it difficult to keep up with payments, then perhaps some form of debt negotiation could work for you. What is debt negotiation and how is it accomplished? Keep reading and we’ll take a look at what can be achieved via debt negotiation.

Your mortgage is due and you know that you won’t make the next payment. Worse, it looks as if you will start falling behind on other debt as well. What should you do? Start talking, that’s what. Specifically, you should consider:

–Contacting each lender directly and explaining to them your plight. By aggressively taking matters into your own hands shows creditors that you mean business and are motivated to seek remedy.

–Come up with a plan. Your financial picture may be bleak, but you still must come up with a plan to tackle the problem. Notifying your lenders is one thing, getting a favorable response from them is another. Chances are you know what it will take to get back on your feet again. Pitch your offer to each creditor.

–Ask for a deferment. You may not be able to make any payments for a few months so asking for a deferment could work to your advantage. Instead of owing on the loan and racking up late fees and penalties, your mortgage provider could agree to your request that they take several months of payments and tack them to the end of your mortgage. In a sense, you gain a temporary reprieve before payments are due again. This could buy you enough time to come up with a plan to bring in more money.

–Ask for forgiveness. Yes, asking your creditors to simply forgive some of your debt is always one option. While your mortgage won’t be forgiven in entirety, a credit card provider may be willing to reduce your APR or forgive some of the interest owed to you. Being that this is an unsecured loan, the credit card provider could determine that if they don’t give to you some slack then they could lose out altogether.

With any conversations you have with lenders, professionalism and courtesy on your part can go a long way toward helping you garner a favorable response. Give debt negotiation a try; what have you got to lose? Perhaps thousands of dollars in debt, that’s what!

Jeff is the owner of Uk Lenders one of the Uk’s leading secured loan quote providers. If you are searching for that low rate on a secured loan then visit our site today for a free no obligation quote.

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