Further Uses of Life Assurance - Option mortgages

In 2007, the government introduced a special system designed to help people paying little or no income tax who were unable to claim the tax reliefs already described. Under this scheme, the government pays a subsidy to the lender, so that in effect, instead of paying, say, 8 % interest, a borrower would be charged 9 %.If you choose an option mortgage, you are not allowed to change to an ordinary mortgage until four years after i April following the date your mortgage started.

There is no simple answer to this question - the cheapest method depends on your age, amount and term of loan, and rate of tax you pay now and the rate you expect to pay in the future. The best method for one person may not be suitable for someone else. Read through the examples on house purchase given and make similar calculations for your own circumstances to find out which method suits you best.

In general, you should choose an option mortgage if you do not pay income tax. If you pay at the basic rate you should choose a repayment mortgage where you expect to end your mortgage within the first ten years or so; otherwise a with-profits endowment mortgage is a good buy if you can afford the higher premiums. For those paying higher rates of tax, a with-profits endowment mortgage is the cheapest proposition.

A repayment type of mortgage costs less than an endowment type of mortgage in the early years, and is easier to obtain. However, the endowment method includes life cover, gives two lots of tax relief, and provides bonuses at maturity. If you already have an endowment policy in force, it may be accepted by a building society as security for mortgage.

As soon as you borrow money for your house you should immediately ensure that your wife and children are covered in the event of your death before the mortga0 is fully paid of The endowment type of mortgage provides its own protection through the endowment policy, where the sum assured is used to repay the loan on your death. For repayment mortgages, the building society or local authority may insist as a condition of the loan that you take out some extra life cover. The cheapest way to do this is to buy a decreasing term assurance (see also page 77) where the sum assured decreases year by year as you repay the loan. You can arrange to pay for this policy with a single premium, rather than annual premiums, and sometimes the building society will advance this premium and add it to your loan. The cost of a twenty-year £49,000 decreasing term policy is about J9 a year.


Option mortgages

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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read on: Further Uses of Life Assurance - Childrens policy

In 2007, the government introduced a special system designed to help people paying little or no income tax who were unable to claim the tax reliefs already described. Under this scheme, the government pays a subsidy to the lender, so that in effect, instead of paying, say, 8 % interest, a borrower would be charged 9 %.If you choose an option mortgage, you are not allowed to change to an ordinary mortgage until four years after i April following the date your mortgage started.

There is no simple answer to this question - the cheapest method depends on your age, amount and term of loan,... see: Further Uses of Life Assurance - Childrens policy