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The Truth behind Pension Mortgages
A pension mortgage may seem lucrative at the first sight. However, they seldom are, if the customers who took pension mortgage are to be believed.
Nevertheless, before delving into the ill consequences of the mortgage, let us observe why pension mortgages seem lucrative. The most eye-catching feature of pension mortgages, which lures people, is that the pension mortgage requires to be paid out of the pension amount, which one receives on retirement. This is the feature, which drives people to go for pension mortgages.
While in most of the mortgages, the customer would have to pay the full repayment amount himself; in pension mortgage, he gets assistance from the government, though not directly. To every 78p, which a person contributes to the pension fund, the government contributes 22p (This is for a basic rate taxpayer. In case of those who are high rate taxpayers, the ratio changes to 60:40. This means that for every 60p contributed by the customer, governments share is 40p). Therefore, a customer is actually paying just 78 and 60 percent respectively. Besides, the customer is also getting tax relief for paying into the pension plan.
People normally do not like to burden their present life. Their optimism assures them that their future will be secure. Pension mortgage is basically an interest only mortgage. This means that they will have to pay significantly less on the mortgage as they are paying only the interest. People who desire more of immediate relief shall be pleased with the idea of paying less.
However, they have to pay the mortgage amount drawn. At the end of the term of repayment of the pension mortgage, the principal amount will remain unaffected. This is because all through the period of repayment the customer has been paying just the interest. This principal amount will have to be repaid with the help of pension. Normally 25% of the pension amount is available in cash. This may be used to pay the pension mortgage.
Taking these into account, pension mortgages seem to be the perfect mortgage. Neither is the customer forced into paying more on the monthly installment, nor does he face any difficulty in the final repayment.
But, what of the life after the pension mortgage is paid. Is the life ahead as smooth as the repayment? No, it is not. You have retired and have lost a source of income. You are not in the prime of age to device new sources of income. You need something to rely upon once you retire. Utilizing cash from pension fund for paying a pension mortgage will be inappropriate. This reduces the amount of pension available for the customer to use.
Another feature, which can be seen as exploitative, is that one cannot go for full and final repayment until the age of 50. This is because a person is not authorized to use any part of the pension fund before they reach the age of 50. Therefore, one will be able to repay the pension mortgage before maturity only out of other resources.
Yet another feature of pension mortgage, which will give you goose bumps, is that there is no guarantee of the pension fund being able to pay the pension mortgage. A pension fund is an investment linked to the stock market. The amount available on the pension fund will depend on the whims of the stock market. Thus, there can be a scenario where the lump sum received through pension is not able to pay the pension mortgage in full. The borrower in such cases may be called upon to meet the deficit through other resources.
A similar scenario may occur when the borrower is not able to pay into the pension fund because of unemployment or death. The house will be repossessed to pay off the pension mortgage. Taking a life assurance policy can be a counteractive measure. This will help pay off the pension mortgage at the time of repayment.
There are numerous lenders in the UK offering pension mortgages. Many of the lenders are available online. After having screened the lenders and making a list of few lenders, it will be good to contact the lenders personally.
Before taking a pension mortgage one must be extra vigilant. A pension mortgage can endanger your after retirement life. Unbiased and professional advice on the viability of pension mortgage for your individual case will be beneficial.
I Have A Slice of the American Dream and It is a 30 Year Nightmare
Well, we did it. We are buying a beautiful, brand new house, planning our wedding, and getting ready to move. The cramped trailer we have lived in will just be a memory. The house we are buying is a 4 bedroom, 2 1/2 bath, 2 car garage slice of the American Dream.
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Guide to Flexible Mortgages
Outlined below is a useful guide to flexible mortgages. Flexible mortgages are also known as Australian Mortgages because they usually feature something which is common in Australia - interest recalculation on a daily basis.
First Time Home Owner Mortgage Loans
First time home owners are sometimes surprised at the complexity of the mortgage lending process. If you are searching for a mortgage and you have never owned a home, there a few things you can do to make the mortgage process less confusing. First time home owners should educate themselves on the home-buying experience before contacting mortgage lenders. There are many choices in obtaining a first time home owner mortgage loan. Friendly mortgage professionals are available to assist you in making the right decisions.
Carolina Mortgage Loans
You're selling your home and are looking to relocate to the Carolinas. While researching homes in your new community you discover that you do not know of any mortgage lenders in the area. Your realtor is pressuring you for some answers. The solution? You turn to the internet and discover Carolina mortgage loans are available right online.
Avoiding Foreclosure Scams
If your mortgage company is threatening foreclosure, there are things you can do to avoid it (see my article titled "How to Avoid Foreclosure"). However, you should be aware of scams. If there are solutions to your problems that seem too good to be true, they probably are.
Mortgage Sales Hit Problems
The housing market has been buoyant over the past few years, but mortgage providers and first-time buyers are both now facing a tough time. Following announcements from the Bank of England that there has been an overall decline in the total number of UK home-buyers, and a declaration from the Financial Ombudsman Service (FOS) that the number of disputes concerning mis-sold mortgage endowments has now hit record levels, it seems that mortgage lenders are facing a bleak time. Add to this the results of a new survey, by the Edinburgh Solicitors Property Centre, which shows potential first-time buyers fear that they may never get onto the property market, and you start to see a worrying picture of the housing market emerge.
Refinancing Your House - How to Know Whether to Refinance or get a Second Mortgage
Refinancing your house's mortgage is not the same thing as getting a second mortgage. While both allow you to cash out your home's equity, terms and rates differ between the two types of loans. To know which financing option is best for you, learn each loan's features and pick the one that best meets your needs.
Thought Fixed Rate Will Give You a Respite from the Perils of Variable Rates! Think Again
Slight increases in the interest rates raise your hackles. Tension grips your mind as to how you are going to make the extra payment. Preparations begin right then to provide for the repayment, though it requires a huge cut in the monthly expenses.
Option One Mortgage Loans ? Getting an Option ARM or Option One Mortgage Loan
Have you heard about or been interested in finding out more about option one mortgage loans? They are becoming very popular, but its important to understand how they work before you apply for one. I will describe, in this article, an overview of the most common type of option ARM mortgage loan or option one mortgage loan.
If you fall behind in your mortgage payments, you face the threat of foreclosure.
Home Equity Loans
A home equity loan allows you to cash-in on the equity you have built-up in your home. The funds you receive can be used for debt consolidation, home improvement, college education, investments or any purpose. With a home equity loan your home is used as collateral to secure the loan. If you default on the payment you can lose your home so it is important to insure that you can afford to take out the loan before you sign on the dotted line!
Bad Credit Home Financing - Get The Mortgage Loan You Want Even With Poor Credit
Having poor credit alone cannot hold you back from getting the home loan you want. Buying a home that is everything you want in a home, is a very exciting experience. The blemishes on your credit history will not alone keep you from getting the home you want and the home you deserve.
Council Right To Buy Mortgage ? Transform Your Accommodation Into Home
Homeowner - does this term catch your attention every time you hear it? It is a powerful term. It is hard being a tenant for long. Eventually you want to own a house perhaps that was your aim all along. If you dream of your own home every night then perhaps council right to buy is the scheme which you need to look out for. If you have lived in your council house for long then you may be able to buy the house at discount through council right to buy.
Top 5 Methods to Manage Your Home Equity
As your home appreciates in value, you gain equity. You can look at this equity, as a portion of the value of your home, which becomes an asset that is not burdened by debt. Therefore, this is a critical financial vehicle that cannot be ignored.
Kings Bay Saint Marys & Kingsland Georgia Real Estate - Getting a Home Loan with Damaged Credit
So, you have made the decision that you would like to become a homeowner. As lenders, we have to perform a credit check. The credit we review are provided by all three reporting agencies. Equifax, Experian and Transunion are the three agencies lenders use. The middle of all three beacon scores is the one used to qualify a borrower for a mortgage.
Bad Credit Mortgage Loans ? How To Get Approved
Persistence is the key working toward getting approved for a bad credit mortgage loan. There are many factors that you, as a borrower have control over that can help you get approved faster and easier. There are guidelines that most sub-prime lenders go by that, if you know them, can help you move through the process without getting stuck, unable to get financing.
Home Equity Lines of Credit - the Basics
A Home equity line of credit is a loan which is similar to a credit card. These often have a very low interest rate (In most cases even lower than home equity loans). A Home equity lines of credit acts as a form of revolving which your home equity services.
Private Mortgage Insurance (PMI)
If your down payment on a home is less than 20 percent of the appraised value or sale price, you must obtain private mortgage insurance, known as PMI, with your lender. This will enable you to obtain a mortgage with a lower down payment because your lender is now protected against any default on the loan.
Fixed Rate or Adjustable?
Fixed rate or adjustable rate mortgages are two choices of mortgage loans that most lenders will offer you. Your financial situation, how long you plan to live in the home, the current interest rates, and what risks you are willing to take is the best way to decide which loan makes the most sense for you.
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