Alliance Leicester 2 Year Base Rate Tracker Mortgage Plan

Mortgage Plan : Alliance Leicester 2 Year Base Rate Tracker Mortgage Plan

Initial Interest Rate: 6.24% for two years

Rate for remaining term (Variable): 7.89%

Overall cost of comparison (APR): 7.9%

Early repayment charges Apply?: Yes *

Product Fee: £999

Keep your payments lower for the first two years of your mortgage with a rate of Bank of England Base Rate +0.49%. Then Bank of England Base Rate +2.14% for the remainder of the term (variable) 10% Overpay facility. Loans available between £25,000 and £250,000. *Early Repayment Charge: You are only tied into your mortgage during the first two years. Repay all or part of your mortgage in years one to two and pay a fee of 5% of the amount repaid.

Link to previous articles: Alliance Leicester 2 Year Base Rate Tracker Mortgage Plan Alliance Leicester 2 Year Fixed Mortgage Plan Alliance Leicester 2 Year Fixed Buy To Let Fixed mortgage Alliance Leicester 5 Year Discount Max LTV 90% Mortgage Plan Alliance Leicester 2 Year Base Rate Tracker FeeSaver Alliance Leicester 2 Year Base Rate Tracker Max LTV 90%

Mortgage Charges and fees - What to lookout for

Here is a list of common Mortgage Charges and fees that one should take note of:

Arrangement Fees

Most lenders nowadays charge you for the work involved in setting up a mortgage or to reserve a loan at a particular rate. The amounts can vary considerably between lenders. Paying more doesnt always get you a better deal.

High Lending Charge

If you are borrowing more than 90 per cent of the property value, check to see whether you will be charged an extra fee. This is to protect the lender in case you fail to keep up the payments, but not all of them make this charge.

Insurance

Some lenders will offer you a lower mortgage rate if you buy their home insurance products. They will also encourage you to take out their mortgage payment protection policy. It is usually better to shop around for the cheapest insurance deal.

Early Redemption Penalties

With mortgage special offers, fixed rate deals, etc, you will normally be charged a penalty if you pay off your loan within the offer period. In particular, try to avoid those loans with redemption penalties that extend beyond the end of the offer period as you will be stuck on the lenders standard variable rate.

Initial Disclosure Documents And Key Facts Illustration

Initial disclosure documents (IDDs) spell out mortgage advisers services, such as whether they can recommend products from one company only, or are free to sell mortgages from all lenders. Key facts illustrations (KFIs) are given to borrowers when they apply for or are recommended a mortgage. These outline the mortgages cost over its term, repayments, fees and an interest rate expressed as an annual percentage rate (APR).

Annual Percentage Rate

The APR tells prospective customers the interest rate over the life of the mortgage. This factors in any initial offer rate and then the lenders standard variable rate to which the mortgage reverts, as well as the impact of fees. The APR in the key facts document does not reflect that many mortgage borrowers switch to better deals than the lenders standard variable rate (SVR) after their initial offer expires. Neither does it include the potential costs on leaving the mortgage, such as administration fees and early repayment charges.

Standard Variable Rate

Because house prices are at a record high many people (probably including yourself) are now thinking of their mortgages in the long term as well as the upfront rate. For this reason it is worth knowing what current customers are paying. It is highly unlikely that when you come to the end of your fixed or discount rate period you will be on the same SVR as current customers. But you can use the information to see how the lender compares against others in the market.

Link to Previous article : Types of Mortgages

Complaint about a mortgage endowment policy

This set of articles from FSA is for you if:
_ you have a complaint about the way your endowment mortgage was sold to you.
It sets out:
_ what you can complain about and how to do it;
_ the time limits within which to make your complaint; and
_ how compensation is worked out.

This article from FSA explains what may give you grounds for complaint and tells you how to make a complaint about a mortgage endowment policy. But time may be running out, so if you want to complain, do it now. Otherwise you may be too late, or the amount of compensation you can claim may be limited.

If your endowment policy is not expected to pay out its target amount, you may be left owing money on your mortgage (known as a shortfall).


Making a complaint

Before you can get compensation you need to show that you have grounds for a complaint (see below) and that you have lost out financially as a result.

If you haven’t lost out, but are still unhappy with the risks of an endowment policy, you may be able to switch to a repayment mortgage. If the firm that sold you the policy has upheld your complaint it should help you switch and ensure that you don’t lose out if you have to pay any charges, such as transfer charges.

An endowment policy includes life insurance cover so that the mortgage loan will be paid off if you die early. If you stop the endowment when you move to a repayment mortgage and you need life cover, you should make other arrangements through a mortgage protection plan or a separate life insurance policy.

Do I have grounds for a complaint?

You may have grounds for complaint if your adviser did not:

_ tell you how your money would be invested and explain the risks involved; or

_ explain that an endowment policy is a longterm commitment that often gives a poor return if you cash it in early; or

_ check you were comfortable with the risks of your money being linked to investment performance, including the stockmarket; or

_ check there was a reasonable expectation you would be able to keep up payments until the end of the term; or

_ explain any fees and charges and how they would affect the return on your savings. If you bought your endowment policy between 29 April 1988 and 31 December 1994, you should have been given ‘product particulars’ including charges and surrender values for the first five years. If you bought your policy on or after 1 January 1995, you should have been given a Key Features document with details of fees and charges and their effect on your savings over the longer term.

Remember:

_ if you want to make a complaint, do it now – time may be running out; and
_ take your complaint to the Financial Ombudsman Service (FOS) if you’re not happy with the firm’s response – but do it quickly because time limits apply.

Link to Previous article : Important Tips about Home Purchase Plans (Ijara n Musharaka)

Mortgage endowment policies

If you think you have grounds for complaint about the sale of your endowment policy, but have not yet made a complaint, do it now – time may be running out. But remember – having a potential shortfall doesn’t necessarily mean you were missold your endowment policy.

If you get compensation from making a complaint about the sale of your endowment policy, you should consider using it to reduce the amount you owe on your mortgage.

What can I do now to make up a shortfall?

There are various ways to make up the gap. Some offer more certainty than others. The options available to you are to make changes to your mortgage, start an additional investment or savings plan, or to make changes to your existing investment or savings plan. These are explained below.

You may find that one of the options already matches your existing repayment arrangements. If so, consider the pros and cons of continuing or switching to an option that is better for you. Always take advice if you are not sure which option is right for you.


The figures in the examples that follow are for illustration only.

Example
Helen is 48 and has an interest-only mortgage of £50,000 linked to an investment. The mortgage has seven years left to run and the interest rate is 4.8%.
She asked her product provider to give her an up-to-date projection and this told her there is likely to be a shortfall of about £10,000.

Helen wanted to change £10,000 of her mortgage to a repayment method, but her payments would have increased from £200 a month to £302.97 a month and she didn’t think she could afford the increase. Helen talked to her lender, who told her that she could extend her mortgage term by five years as it will still be repaid by the time she retires, though extending the term does mean that she will pay more in total.

Her monthly payments will now be £252.96. When the investment pays out in seven years and she pays off most of the mortgage, her payments will reduce.


1. Make changes to your mortgage

Ask your lender to switch part of your mortgage – the amount of your projected shortfall – to a repayment method.

􀀗 Your current projected shortfall should be paid off by the end of the mortgage term.

􀀗 Should be fairly simple to arrange at low cost.

􀀗 Could be a flexible option – if the projected shortfall grows, you can switch more of your loan to a repayment method.

Ask your lender to convert your whole mortgage to a repayment method so that you repay all the capital by the end of the term.

􀀗 Your mortgage will be paid off at the end of the term if you keep up the payments.

􀀗 The longer your mortgage has to run, the smaller the increase in your monthly repayments will be.
􀀗 If you can afford it, you could continue with your investment or savings plan just for saving.
And some investment products include useful insurance cover such as life cover, or another
type of cover such as critical illness insurance.
􀀛If you were to cash in your investment you could lose out financially, and you may need to arrange other insurance cover.

So consider getting advice first if you are at all unsure.

If you want to convert your whole mortgage to a repayment method but are worried that you might not be able to afford higher payments talk to your lender. The increase in payments may not be as much as you think and your lender may be able to come up with a plan that can help you.

For example, a repayment mortgage of £50,000 and an interest rate of 4.75% with 15 years to run will cost you £388.41 a month. But in some cases you may be able to extend the term of your mortgage – a mortgage of £50,000 with 20 years to run and an interest rate of 4.75% would be £322.74 a month. This would limit the increase in the monthly payments, though it does mean that you would pay back more in total over the mortgage term. Think very carefully about extending the term if it would end after your retirement age.

Repay part of your mortgage early by paying off a lump sum, or by overpaying each month.

􀀗 This will reduce the amount you owe, and the amount you need your investment or savings plan to cover.
􀀗 It may be better value than saving up separately to pay off the shortfall in future.
􀀗 You should check whether your lender will make an early repayment charge if you overpay.
􀀗 You should also check when your lender will give you the benefit from extra payments – some do so only once a year.

Making changes to your mortgage is probably the lowest-risk option to make up a shortfall. Ask your lender if there will be any charges for making changes to your mortgage, and how much these will be.

2. Start an additional investment or savings plan

Use a cash savings account.

􀀗 The amount you get back does not depend on the performance of the stockmarket.

􀀗 May be a good option for the short term – for example, if you have to delay paying off a lump sum from your mortgage because of early repayment charges, or your mortgage is near the end of its term.

􀀗 Taxpayers can avoid paying tax on their interest by saving in a cash ISA. (But remember there are limits on how much you can pay into an ISA each year.)

In the long term, other options (such as overpaying on your mortgage payments) are likely to prove better value for money.

Use a stocks and shares ISA.

􀀗 Potentially a good way of saving over the longer term. Historically, stocks and shares have grown more than cash savings accounts which have interest added. (But remember there are limits on how much you can pay into an ISA each year).

􀀗 Currently a tax-efficient way of saving. However, not sure of the government policies in the future

􀀛This type of product is linked to the stock market, and the value of your investment could fall as well as rise. So there’s no guarantee that your investment will grow enough to make up a projected shortfall.

􀀛Stocks and shares ISAs are meant for investing in the long term, and generally may not be suitable if you only have a short time to build up a lump sum.

If you decide to start an investment or savings plan to make up a shortfall, it would be a good idea to take financial advice.

Link to Previous article: Pay your mortgage with investment/saving plan

Mortgage endowment policies

If you think you have grounds for complaint about the sale of your endowment policy, but have not yet made a complaint, do it now – time may be running out. But remember – having a potential shortfall doesn’t necessarily mean you were missold your endowment policy.

If you get compensation from making a complaint about the sale of your endowment policy, you should consider using it to reduce the amount you owe on your mortgage.

What can I do now to make up a shortfall?

There are various ways to make up the gap. Some offer more certainty than others. The options available to you are to make changes to your mortgage, start an additional investment or savings plan, or to make changes to your existing investment or savings plan. These are explained below.

You may find that one of the options already matches your existing repayment arrangements. If so, consider the pros and cons of continuing or switching to an option that is better for you. Always take advice if you are not sure which option is right for you.


The figures in the examples that follow are for illustration only.

Example
Helen is 48 and has an interest-only mortgage of £50,000 linked to an investment. The mortgage has seven years left to run and the interest rate is 4.8%.
She asked her product provider to give her an up-to-date projection and this told her there is likely to be a shortfall of about £10,000.

Helen wanted to change £10,000 of her mortgage to a repayment method, but her payments would have increased from £200 a month to £302.97 a month and she didn’t think she could afford the increase. Helen talked to her lender, who told her that she could extend her mortgage term by five years as it will still be repaid by the time she retires, though extending the term does mean that she will pay more in total.

Her monthly payments will now be £252.96. When the investment pays out in seven years and she pays off most of the mortgage, her payments will reduce.


1. Make changes to your mortgage

Ask your lender to switch part of your mortgage – the amount of your projected shortfall – to a repayment method.

􀀗 Your current projected shortfall should be paid off by the end of the mortgage term.

􀀗 Should be fairly simple to arrange at low cost.

􀀗 Could be a flexible option – if the projected shortfall grows, you can switch more of your loan to a repayment method.

Ask your lender to convert your whole mortgage to a repayment method so that you repay all the capital by the end of the term.

􀀗 Your mortgage will be paid off at the end of the term if you keep up the payments.

􀀗 The longer your mortgage has to run, the smaller the increase in your monthly repayments will be.
􀀗 If you can afford it, you could continue with your investment or savings plan just for saving.
And some investment products include useful insurance cover such as life cover, or another
type of cover such as critical illness insurance.
􀀛If you were to cash in your investment you could lose out financially, and you may need to arrange other insurance cover.

So consider getting advice first if you are at all unsure.

If you want to convert your whole mortgage to a repayment method but are worried that you might not be able to afford higher payments talk to your lender. The increase in payments may not be as much as you think and your lender may be able to come up with a plan that can help you.

For example, a repayment mortgage of £50,000 and an interest rate of 4.75% with 15 years to run will cost you £388.41 a month. But in some cases you may be able to extend the term of your mortgage – a mortgage of £50,000 with 20 years to run and an interest rate of 4.75% would be £322.74 a month. This would limit the increase in the monthly payments, though it does mean that you would pay back more in total over the mortgage term. Think very carefully about extending the term if it would end after your retirement age.

Repay part of your mortgage early by paying off a lump sum, or by overpaying each month.

􀀗 This will reduce the amount you owe, and the amount you need your investment or savings plan to cover.
􀀗 It may be better value than saving up separately to pay off the shortfall in future.
􀀗 You should check whether your lender will make an early repayment charge if you overpay.
􀀗 You should also check when your lender will give you the benefit from extra payments – some do so only once a year.

Making changes to your mortgage is probably the lowest-risk option to make up a shortfall. Ask your lender if there will be any charges for making changes to your mortgage, and how much these will be.

2. Start an additional investment or savings plan

Use a cash savings account.

􀀗 The amount you get back does not depend on the performance of the stockmarket.

􀀗 May be a good option for the short term – for example, if you have to delay paying off a lump sum from your mortgage because of early repayment charges, or your mortgage is near the end of its term.

􀀗 Taxpayers can avoid paying tax on their interest by saving in a cash ISA. (But remember there are limits on how much you can pay into an ISA each year.)

In the long term, other options (such as overpaying on your mortgage payments) are likely to prove better value for money.

Use a stocks and shares ISA.

􀀗 Potentially a good way of saving over the longer term. Historically, stocks and shares have grown more than cash savings accounts which have interest added. (But remember there are limits on how much you can pay into an ISA each year).

􀀗 Currently a tax-efficient way of saving. However, not sure of the government policies in the future

􀀛This type of product is linked to the stock market, and the value of your investment could fall as well as rise. So there’s no guarantee that your investment will grow enough to make up a projected shortfall.

􀀛Stocks and shares ISAs are meant for investing in the long term, and generally may not be suitable if you only have a short time to build up a lump sum.

If you decide to start an investment or savings plan to make up a shortfall, it would be a good idea to take financial advice.

Link to Previous article: Pay your mortgage with investment/saving plan

repay your mortgage? What to do? – II

This is part II of the article Can’t repay your mortgage? What to do? – I. Please read the article from part I before continuing with this part.


Things you must to avoid if you cannot pay your mortgage

■ Loans to repay debts

Think long and hard before taking out a loan to repay your debts. Such loans are often very expensive and secured on your home – putting it at greater risk if you can’t keep up the payments. If you are thinking about taking out a further loan, get advice from one of the agencies mentioned on contacts links.

■ Handing back the keys

If you can’t afford the mortgage and want to hand back the keys to the mortgage lender, think carefully. You are still liable for the mortgagee until the property is sold. Often, empty properties sell for less than their market value.

This could mean that your mortgage is not repaid in full and the lender may still pursue you for any outstanding balance – they can do this for up to six years after the sale (five years in Scotland). Your name will be on the repossession register – making it harder to get a mortgage in the future. Seek advice first.

Is any financial help available?

■ Insurance

If you can’t meet your mortgage payments because of a loss of income or your income has fallen (perhaps because you’re on long-term sick leave), you should check whether you have any mortgage payment protection insurance.

If you do, check whether your policy covers your specific circumstances and make a claim straightaway. If your claim is refused, and you don’t agree with the refusal, you may be able to take your case to the Financial Ombudsman Service – see Useful contacts .

The Financial Ombudsman Service provides consumers with a free, independent service for resolving disputes with financial firms.

■ Benefits

There may be benefits you could claim to increase your income – contact your local Jobcentre Plus office (details in the phone book) or an advice agency for information.

■ If you claim Income Support or Job Seeker’s Allowance, the local Jobcentre Plus office will usually provide some help with your mortgage payments. How much you get and when it starts will depend on when you took out your mortgage and how long you have been receiving benefits. The local Jobcentre Plus office can help only with interest payments and these will be paid at a rate set by the government.

■ If you, or your partner are aged 60 or over you may be entitled to Pension Credit. In certain cases you could get an extra amount of Pension Credit to cover mortgage interest payments. To find out more see the Pension Service’s website at www.thepensionservice.gov.uk or get a copy of the leaflet PC1L Pension Credit from your Post Office.

Link to Previous article: Can’t repay your mortgage? What to do?