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Financial Services
Making the right decision when taking out a financial product can save you money for years to come. Most of us don’t have the time or inclination to change our providers as often as we should. Equally, when you do want to reassess your position, where do you get advice?
Leafing through Sunday newspaper money sections and scrolling through websites and is one way. It can, however, take a good deal of time to find the right answers. Independent financial advisers can take the weight off by helping you choose the best way to manage your finances. If you need to find a good independent financial adviser in Wakefield, have a look at our Financial Services listings.
Do you expect the unexpected? If your glass is normally half full, rather than half empty, it can be tempting to leave insurance for another day. However, if something does happen to your house, your belongings or your car, you’ll be a happier individual if they are covered. The insurance services companies detailed deal in all types of insurance, including special policies for students.
Loans are part of modern British life, as we all live for the day in a “buy now, pay later” culture. If you are considering taking out a loan, use a respectable company, such as one of the Wakefield-based firms we recommend. Providers should assess your income and spending to ensure that repayments are manageable. You should always check interest rates carefully.
The biggest loan of your life will be your mortgage, if you have one. The mortgage advisers included in the listing will be able to take you straight to the deals that work out best for you. You should always consider the fee charged when using this kind of service; some providers offer a free service to clients, especially first-time buyers (charging the lenders instead), while others charge an up-front fee.
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Mortgages
A mortgage is a sum of money borrowed from a bank or building society. The money is then paid back to the lender over a fixed period of time. together with accrued interest. There are many different types of mortgages to suit your requirements.
There are two different types of Mortgages:
Repayment (capital and interest mortgage)
Interest Only (ISA, Pension, or endowment mortgage)
Repayment Mortgage
Your monthly repayments consist of repaying the capital amount borrowed together with accrued interest. On your mortgage, statement which is often received annually, you will see the outstanding balance decreases throughout the term.
Advantages of Repayment mortgage
1) At the end of the term you are safe in the knowledge that the total amount of debt has been repaid.
2) Over payments and lump sum payments can be made into your mortgage amount reducing both the interest and the capital amounts repayable.
3) Life assurance is not always necessary in taking out this type of mortgage.
Disadvantage of Repayment
1) There may be some penalties for making lump sum or overpayments into your mortgage account. Int he early years of a repayment mortgage the money in the monthly payment is used to pay interest not the capital.
2)If you have no life assurance cover in the first place and you die,before the loan is repaid. This may result in the property having to be sold in order to repay the debt owed.
Interest Only
with this type of Mortgage, each mortgage payment is only used to pay off interest. At the same time, the borrower takes an alternative repayment vehicle (method of paying off the mortgage) such as an ISA, pension plan or endowment policy. The most important fact about an interest only mortgage, is that the monthly repayments do not repay any of the outstanding capital balance. As a consequence it is important that the repayments are maintained into the repayment vehicle. otherwise it will not be possible to pay off the mortgage at the end of the term,
Endowment
This is the most common type of interest only mortgage which also provides life assurance cover and a fixed payment for the investment. The fixed payments are based on the amount of loan together with the Mortgage term and are designed so that at maturity, the amount invested and the earning are sufficient to pay off the mortgage. there is no guarantee that when the endowment matures and 'pays out' the balance will be sufficient to pay the mortgage back.
Endowment policies provide life assurance so in the event of death, the mortgage is paid off.
ISA
The individual savings account (ISA) is a tax free method of saving. Using an ISA as a repayment vehicle is growing in popularity however due to the ISA's complexity it is only for the financially sophisticated ot borrowers taking advice from a suitable qualified financial advisor.
Pension Plan
Life assurance cover is provided and monthly payments are made into a pension fund. When the benefits are eventually taken. the mortgage is repaid using tax free cash from the remainder of the fund. The plan holder can then draw a pension from the fund. This product which is most often used by the self employed is only for those taking advice from a qualified financial advisor.
Advantages of Interest Only Mortgages:
1)If the proceeds of the plan exceed the amount required to pay the mortgage then this is received as a cash lump sum by the borrower.
2) Some plans are tax efficient
Disadvantages of Interest Only Mortgages
1) If the proceeds of the repayment vehicle do not achieve the expected then there will be a short fall. The borrower remains liable for any shortfall on the mortgage hence the outstanding balance will need to be paid off from other resources. Regular checking of the policy fund itself by the borrower and the lender should minimise any risk. If the plan is not reaching its expected target, the borrower can increase payments into the policy or invest in another product to cover anticipated shortfall.
2)Cashing in the plans early may result in financial penalties. These will be provided for the initial agreement. In addition the lender has no way of tracking some of the more modern repayment vehicles such as an ISA. This will result in instances where a borrower lets an investment lapse without realising it is used to pay off the mortgage. This will result in situations where there is no method of paying off the mortgage and the lender will only become aware at the end of the mortgage term.
Interest Rates On Mortgages
Fixed Rate Mortgage
With a fixed rate mortgage the amount you repay the lender each month can be at a fixed interest rate for a specified period of time regardless of changes to the interest rate in the market place. It is common for lenders to offer rate for a fixed period of time usually 2-5 years, but shorter and longer periods can be found in the market.
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