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Endowment Mortgages
By Andrew Verity |
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Holders of endowment mortgages are being urged to take action to avert the risk of ending up with big debts when their mortgages mature.
Only one in ten of those sold endowment mortgages were warned there was a risk that the endowment policy might not pay off the loan. And six out of ten say they were guaranteed the endowment policy would comfortably pay off the loan.
The figures, from the Financial Services Authority (FSA), suggest many homeowners may have grounds for compensation.
Under the Financial Services Act 1986, enacted in 1988, sales people must assess a customer's attitude to risk. Because endowment mortgages are inherently more risky than repayment mortgages, sales people should only sell them to people willing to take an extra risk. Otherwise they have probably "mis-sold" the endowment policy.
成人快手owners may well deserve compensation for mis-selling if any of the following are true:
- the risk of the endowment not paying off the loan was never explained, and you would never have accepted this risk had you known about it
- your endowment policy will finish after the date when you must repay your mortgage loan
- you were advised to stop paying into one endowment policy in order to take out another
- your endowment policy will finish after your retirement and the adviser who sold it never assessed your ability to keep up payments in retirement
成人快手owners who believe they have been mis-sold an endowment mortgage should first complain to the companies that sold them. They are under strict guidance from the FSA on how to compensate.
If homeowners are unhappy with the way the company has handled their complaint they can apply to the Financial Ombudsman (www.financial-ombudsman.org.uk). So far the ombudsman has settled half of all complaints in favour of the complainant. So far just 拢35 million has been paid out in compensation, with settlements averaging 拢3,349.
Every one of the six million homeowners with endowments should by now have received a "re-projection letter", coded green, amber or red.
- Green means the endowment is on track to pay off the mortgage loan.
- Amber means the endowment might not pay our enough on maturity to pay off the mortgage
- Red means there is a high risk the endowment will not pay off the mortgage.
Those with "red" letters should take action now. Many of them will be due compensation but should also consider other steps. Those with amber or green letters who are worried should also consider these options:
Either
- reduce the mortgage loan; or
- increase savings to ensure the loan can be repaid at the end of its term
This can be done by:
a) Switching the amount of the shortfall on your home-loan to a repayment mortgage.
b) Repay some, or all, of your mortgage early, either with a lump sum or monthly overpayments (but check there are no extra penalties for early redemption)
c) Convert the interest-only loan that goes with your endowment to a repayment mortgage.
d) starting an additional savings plan to use as a lump sum to cover any shortfall
e) invest in a stocks and shares ISA if there is more than 5 years to go to maturity, and you are happy with the stock market risks
Further details of the different approaches can be found at:
Please not the 成人快手 is not responsible for the content of external websites.
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