Endowment Mortgages & Endowment Shortfalls

Written by David Miles


Continued from page 1

Interest rates and other economic factors, such as stockmarket growth and interest rates, are much lower now than they were in repparttar 1980s and 1990s, so it has now been necessary to reduce projected rates of growth for people taking out a new endowment policy today. As a result,repparttar 112321 monthly premiums for a new endowment policy today will be higher than they were in previous decades.

How does this affect existing policyholders?

Because actual growth rates have been lower thanrepparttar 112322 projected 7.5% rate, an endowment policy taken out inrepparttar 112323 1980s or 1990s may now not be worth enough at maturity to pay offrepparttar 112324 interest-only mortgage to which it is linked.

Insurance companies are therefore assessingrepparttar 112325 state of people's policies and contacting them to advise what action they should take now to avoid a potential shortfall atrepparttar 112326 end of their mortgage.

How will I be affected?

In most cases, if you took out a with-profits endowment inrepparttar 112327 mid-1980s or earlier,repparttar 112328 fund should be sufficient at maturity to pay offrepparttar 112329 mortgage. This is becauserepparttar 112330 money in your endowment policy will have benefited fromrepparttar 112331 higher rates of interest and better stockmarket growth ofrepparttar 112332 1980s.

But,repparttar 112333 shorterrepparttar 112334 length of time your endowment has been running,repparttar 112335 greaterrepparttar 112336 potential for a shortfall at maturity.

It is impossible to predict exactly how large this shortfall may be, as so much depends on future fund performance between now and repparttar 112337 time when your endowment matures. Insurance companies are trying to assessrepparttar 112338 issue by looking at how much has been accumulated in your fund so far and making more conservative estimates about future growth.

What can I do now?

There are a number of options:

1. You can increase payments into your existing endowment policy (subject to Inland Revenue rules), or take out additional endowment policy withrepparttar 112339 same insurer or a different insurer. However, you may decide you don't want to be tied into another endowment.

2. You can ask to extendrepparttar 112340 term of your endowment policy, subject to your mortgage lender agreeing. This is probably not a good idea if it means your policy would continue beyond your retirement age.

3. You can set up an additional investment, such as an individual savings account (ISA). An ISA may be cheaper and can offer a wide range of investment choices to suit your attitude to risk.

4. You can ask your mortgage lender to switch part of your mortgage (equivalent torepparttar 112341 projected shortfall on your endowment) to a repayment mortgage. You can get an idea ofrepparttar 112342 costs ofrepparttar 112343 new repayment part of your mortgage by using an online mortgage calculator.

5. You can use any other spare lump sum to pay off part of your mortgage. You will need to check first to see if this would make you liable for any early redemption penalties from your lender.

Which isrepparttar 112344 best option?

Everyone's situation is different, and everyone has their own particular preferences. If you are unsure what to do, you should take professional mortgage advice to help you review your options and come to a decision as to what to do.

Should I just cash in my endowment?

This would almost certainly be a mistake. Many endowment policies are structured such thatrepparttar 112345 management charges are highest in repparttar 112346 early years. If you surrenderrepparttar 112347 policy early on,repparttar 112348 amount you get back may well be less thanrepparttar 112349 amount you have paid in up until now.

Also, you need to bear in mind that a large proportion ofrepparttar 112350 final value of a with profits endowment depends on its terminal bonus. The size of this bonus will not be known untilrepparttar 112351 policy matures.

So,repparttar 112352 best strategy is normally to keeprepparttar 112353 endowment in place. If you need to cut down on your monthly outgoings, you can leave a policy "paid up" (although you may incur penalties for doing this). This means that you do not pay any more money intorepparttar 112354 endowment, but leave it to mature onrepparttar 112355 original date for a lower amount. If you do this, you will need to make sure you still have sufficient life cover to protect your mortgage.

It is possible to sell endowment policies onrepparttar 112356 second-hand endowment market. The amount you get will depend onrepparttar 112357 policy and how long it has left to run. Again, this is an area where you would be well-advised to talk to a professional before taking any action.

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Copyright 2004 David Miles. You are welcome to reproduce this article on your website, so long as it is published "as is" (unedited) and withrepparttar 112358 author's bio paragraph (resource box) and copyright information included. In addition, all links to external websites must be left in place.

David Miles is the editor of a number of mortgage and remortgage websites, including: The UK Mortgages & Remortgages Website London Remortgages


Make Sure Your Holiday Charity Contribution Counts

Written by Sherri Allen


Continued from page 1

The internet also provides some excellent resources for researching charities before you make contributions. Here are a few:

* Charity Navigator (http://www.charitynavigator.com/) -- Charity Navigator helps charitable givers make intelligent giving decisions by rating and providing information on over 3,100 charities. You can search their extensive charity database by category, region or keyword.

* Better Business Bureau Wise Giving Alliance (http://www.give.org/) -- This organization developed "Standards for Charity Accountability" to assist donors in making sound giving decisions. You can read their evaluations of charities based on their compliance with these voluntary standards.

* American Institute of Philanthropy (AIP) (http://www.charitywatch.org/) -- The AIP is a nationally prominent charity watchdog service whose purpose is to help donors make informed giving decisions. They producerepparttar Charity Rating Guide and Watchdog Report, which provides information on approximately 500 national charities. At Charitywatch.org you will find a list ofrepparttar 112320 charities that receiverepparttar 112321 highest ratings from AIP, as well as tips and hints for giving wisely.

Don't risk ruining your Christmas spirit by finding outrepparttar 112322 charitable contribution you made went to an organization that spends your money unwisely or in a manner other than what was represented. By doing just a little homework, you can be confident that your donation is spent onrepparttar 112323 people and causes you want to support.

Sherri Allen is the editor of SherriAllen.com, an online publication devoted to topics such as family, food, garden, house & home, and money. For great articles, information, tips, recipes, reviews and coloring pages, visit http://www.sherriallen.com/


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