mortgage/life insurance

stephenni1971

marathonic wrote: »

That's the problem a financial advisor faces - it's difficult to take any risk with respect to insurance, no matter how small. They must be able to justify their proposals given to clients to avoid potential future mis-selling action if, for example, as you say, interest rates were to rise to 15% - however unlikely that may be.

As someone going the direct route, I have the option to take the slight risks. And what is the slight risk - well, given the fact that I can get a £35,000 Family Income Benefit policy over 25 years for £14.52, or 37p per month more than the two separate policies shown above, the risk is that a £15,000 additional annual payment won't cover a mortgage of £150,000.

Your point about them having to pay extra interest is correct - but the extra money they get with the Family Income Benefit policy more than covers this.

It may not for everyone - but, for me, I'd be happier leaving the £15,000 additional annual payment to loved ones than the remaining portion of a £150,000 decreasing term policy.

Just because it doesn't conform to the black and white teachings of the books, doesn't mean it's not a better option.

It's NOT a better option, ever.

But of course why listen to people who are actually qualified in what they are talking about ... You did it DIY so I bow to your knowledge...

marathonic

stephenni1971 wrote: »

It's NOT a better option, ever.

But of course why listen to people who are actually qualified in what they are talking about ... You did it DIY so I bow to your knowledge...

So let's say someone has children 10 years away from university degrees and you have a mortgage where the term is finishing at the same time.

That person can secure a fixed rate mortgage at 3.99% for the entire term for which they require insurance and know for a fact that the mortgage is going to cost £X per month for the entire term.

If they can secure a Family Income Benefit policy, at the same cost, that provides an additional annual income greater, and probably significantly greater, than what is required to cover this fixed-rate mortgage, how on earth is it not a better solution than getting a second policy to pay off the mortgage in it's entirety?

I challenge you to use your common sense in reading the above reply and not start spouting off qualifications. I'm a computer programmer and know that there are many people who haven't got an equivelant degree to mine who can write programs as good, if not better, than I can. Do you think that financial advice is the holy grail of qualifications where this is impossible?

marathonic

I know that my last post contains a lot of assumptions - but those are just to prove the point. There are many people that fall outside these assumptions where, in my opinion, the single policy is likely to work out the better option.

Using my details based on a £150,000 mortgage over 25 years, a similar monthly premium results in a choice between:

• £20,000 annual income and a cleared mortgage; or
• £35,000 annual income and a mortgage of whatever is left from the original £150,000 at the point I happen to die

It doesn't take a rocket scientist to figure out which is likely to be best.

The availabilty of 10 year fixed rate mortgages at 3.99% highlights how likely HSBC's analysts think interest rates are to rise significantly in the short-medium term.

The £15,000 in extra income would cover repayments on a 25 year mortgage of £150,000 if rates rose to 8.8% tomorrow morning.

ACG

HSBC have a 10 year fixed at 3.99% for a reason - its not to make money from the mortgage. They cherry pick customers, people they can earn more money on the back of through investments/pensions/life/banking its a loss leader.

Not many people tie in to a 10 year deal, not many people know they will want to remain in their property for 10 years. I cant imagine i will be in my house for 10 years.

Im not going to argue about your knowledge because you clearly know a bit, whether i agree with your opinions or not is another matter, but as were talking about a hypothetical situation im not getting into a debate.

Just to add, im not saying you are right or wrong and my post hopefully wont be read as though i am on one side of the fence or another.

marathonic

ACG wrote: »

HSBC have a 10 year fixed at 3.99% for a reason - its not to make money from the mortgage. They cherry pick customers, people they can earn more money on the back of through investments/pensions/life/banking its a loss leader.

Not many people tie in to a 10 year deal, not many people know they will want to remain in their property for 10 years. I cant imagine i will be in my house for 10 years.

Im not going to argue about your knowledge because you clearly know a bit, whether i agree with your opinions or not is another matter, but as were talking about a hypothetical situation im not getting into a debate.

Just to add, im not saying you are right or wrong and my post hopefully wont be read as though i am on one side of the fence or another.

This, of course, is an argument with more reasoning behind it. To say outright that one way is NEVER better than the other, as the figures show, is just unsensible.

stephenni1971

marathonic wrote: »

I know that my last post contains a lot of assumptions - but those are just to prove the point. There are many people that fall outside these assumptions where, in my opinion, the single policy is likely to work out the better option.

Using my details based on a £150,000 mortgage over 25 years, a similar monthly premium results in a choice between:

• £20,000 annual income and a cleared mortgage; or
• £35,000 annual income and a mortgage of whatever is left from the original £150,000 at the point I happen to die

It doesn't take a rocket scientist to figure out which is likely to be best.

The availabilty of 10 year fixed rate mortgages at 3.99% highlights how likely HSBC's analysts think interest rates are to rise significantly in the short-medium term.

The £15,000 in extra income would cover repayments on a 25 year mortgage of £150,000 if rates rose to 8.8% tomorrow morning.

Seriously? One thing you conveniently omit from this is any mention of terms... So how long do you take the policy out for? You are trying to cover two needs with one policy so will end up over or under insured for a portion of the term.

Also with the advent of menu based policies it's very simple to integrate FIB and mortgage term on. A single policy thereby removing the need for two plan/admin charges.

Just for the record, for the a avoidance of doubt, no one should ever consider covering a mortgage need with Family Income Benefit.

marathonic

stephenni1971 wrote: »

Just for the record, for the a avoidance of doubt, no one should ever consider covering a mortgage need with Family Income Benefit.

Stick you to your book knowledge with no flexibility. I'm happy enough to be over-insured where being over-insured actually costs less.

stephenni1971

marathonic wrote: »

Stick you to your book knowledge with no flexibility. I'm happy enough to be over-insured where being over-insured actually costs less.

Book knowledge? :-) :-) :-)

You're having a laugh.

marathonic

stephenni1971 wrote: »

You're having a laugh.

I am indeed... Anyway, I think there's enough information above for the OP to make up their own mind!

There's more than one way to skin a cat!!!

scotty1972

Well that has been very informative from all who took the time to respond thanks very much.