Mortgage Equity Plan - Help!

regularsaver1

sounds like to me that its a hassle and repayment is easier, but up to you

dunstonh

That's a pretty pathetic return, considering you're paying charges as well.

You know better than that Ed. Whilst neither of us would go near their product, the salesman would have to use a target growth rate to achieve that figure. I wouldnt be surprised if a 5% or 6% figure is being used from a safety point of view. Target growth rates have nothing to do with the actual rate of returns.

Still think you are being told a story to make a sale.

lowis

hi ed & dunston

yes the growth rate he used was 7% - and when the 1% management charge (calculated daily) is taken into account this decreased to something like 5.9%. He did say the fund performed MUCH better than the 7% quoted (3 times better), he just used that as a conservative illustration. The plan is Called a Tracker Fund FTSE Allshare.

I did sign the agreement as I needed to get the mortgage nailed but I have 14 days to cancel and find another plan if this is best. The advisor did say it is portable and I can cancel it at anytime, I would just need to provide details of the new product to satisfy Natiownide.

To be honest, I know very little about these plans and signed this one as it was convenient and seemed simple enough to understand. I know it is 'high' risk i.e. I may not get my capital back and that is another reason why I only committed to £20 - at the moment.

What would you guys recommend?

dunstonh

Its expensive for what it is. It's a single sector investment (which is never a good thing). Its medium/high risk.

I wouldn't do it.

I have said it few times now but I am going to repeat it. I think you are being told a lot of rubbish. Indeed, the Nationwide salesman is very close to doing a mis-sale. This is like being told you have to have an endowment policy and complaints made on those plans have been upheld against the advising company. On the one hand you are being told you have to have an investment linked to the mortgage. This is incorrect. The Nationwide terms say:

you have a suitable repayment vehicle, such as an ISA or endowment policy
you are prepared to sell your house at the end of the mortgage term to repay the debt. If this is the case you will need to have at least £150,000 equity in your existing property and we will only lend you 66% of the property value
you intend to sell a second property to repay the loan. The equity in the second property must be at least 120% of the new mortgage amount it is intended to cover

If you fall into one of the other 2 catagories, then you dont need an ISA. If you don't then forcing you to do a £20pm regular contribution ISA to satisfy their requirement should certainly be reported to the FSA. That £20pm is not going to do you any good at all. It is not "suitable" and doesnt satisfy the first rule. However, if they are willing to do it on £20pm, then it suggests it is a sales ploy and not a requirement.

They are forcing you into a medium/high risk investment which stands no chance of repaying the mortgage at the end of the term. Replace the word ISA with endowment and they complaints on the same circumstances as yours have been upheld.

This transaction they are forcing you to do is dodgy.

EdInvestor

This is like being told you have to have an endowment policy and complaints made on those plans have been upheld against the advising company.

It must be said the circumstances do sound very familiar.And just like in the old days people are signing up so they can get the mortgage.

Was lowis told quite definitely that his 200 a month cash ISA was not acceptable? If so on what grounds?

lowis

the advisor did tell me that the 20pm vehicle was unsuitable to meet the repayment needed in 25 years time, and he mas made a note of this in the things i had to sign - to cover his a*se i suspect. i didn't discuss a 200pm ISA with him - as to be honest i would probably be withdrawing from it regularly.

i did take this plan out with a long term view of increasing payments into it (and not just because i had to have it - supposedly) - am now thinking i should cancel this plan just on the fact that you say it is expensive and single sector - but obviously i need to put 'something' in place. where should i start to look for something similar that is less expensive and less dodgy?

and i assume that if i cancelled after the 14 day period i would just be liable for the 1% fee?

dunstonh

and i assume that if i cancelled after the 14 day period i would just be liable for the 1% fee?

After the cancellation rights, you can surrender with no penalty but get the value of the assets, whatever they are worth (£19.20 ). However, this would wreck your equity ISA contribution allowance for the year I cant see [m]any providers taking on a transfer of £20 from another provider.

lowis

i've just been having a play with a chart tool on the fidelity site (thanx superjames) and the natiownwide thing doesn't compare too badly with a couple of the others i plotted (the one superjames suggested). but maybe i should see if i can up my monthly to £50 and get access to a better fund.

ah dunston now you have opened a whole new line of questioning up - so basically if i go ahead with the NW plan but then want to transfer it at a later date, i could get truned down by other providers because it is so rubbish?

dunstonh

ah dunston now you have opened a whole new line of questioning up - so basically if i go ahead with the NW plan but then want to transfer it at a later date, i could get truned down by other providers because it is so rubbish?

Not because its rubbish but because the transfer value is too low.

Ive just been having a play with a chart tool on the fidelity site (thanx superjames) and the natiownwide thing doesn't compare too badly with a couple of the others i plotted (the one superjames suggested).

Make sure the terms you plot are over 5 years. 6 years if possible. Everything has made money virtually over the last 3 years and in a growth market, trackers do well. In a volatile market, they do less well.

cheerfulcat

dunstonh wrote:

I cant see [m]any providers taking on a transfer of £20 from another provider.

A broker might, though.