I'm reasonably sure that my Endowment policy did not work like this. If I died before the term I (i.e. my estate) would get the exact amount specified on the policy, no more, no less. This would happen whether the policy had been in operation for 1 month or was 1 month away from the full term.
Otherwise I would get the sum assured, and any bonuses applied to the policy.
Indeed, that was our motivation ... there were repeated stories where
3,4,5 (more well off) students had clubbed together and managed to buy a house together instead of renting, as each could claim MIRAS, whereas a married couple only got one load of relief.It was always portrayed as a disincentive to marriage, since a couple "living in sin" were better off unmarried.
This is merely a reflection of the fact that with an interest only mortgage the principal balance remains unchanged, whereas with a capital repayment mortgage it redeuces gradually to 0. The total interest payable is proportional to the average principal balance outstanding during the term of the mortgage.
I should also add that interest paid by the borrower is not the same as the lender's profit.
One potential problem is that the customer retires and his income drops and is not able to pay the mortgage any more. If you take home £3000 a month, paying £1000 in mortgage interest is not unreasonable, but paying £1000 from a £1500 pension is quite different.
It was a lobng time ago but I think it was alway limited to 2 people.
I believe Graham only implied that the lender's profit would be proportional to the interest paid. Is that not be correct, to a good approximation?
To be fair, I suspect anyone who has ever bought a mortgage has been through the experience of being lied to by sales staff.
Personally, about six years ago I was told by an HSBC 'advisor' that I didn't need a tracker mortgage because - and I quote - their "standard variable rate will always track base rate closely anyway, because they have to remain competitive."
Fortunately, I was bright enough to ignore this 'advice' and went elsewhere to get a base rate +0.5% tracker with no collar. I've no idea what HSBC's SVR is now, but I'll wager it's more than 1%.
On the balance of probabilities, I'd guess anyone who claims to have been mis-sold a pension almost certainly was.
But the lender of the repayment mortgage gets the capital back steadily dur ing the term and he can lend it out to someone else. If the interest rates are the same then it makes no difference to the lender; he always gets £
5000 per year as long as he lends the money again as soon as he gets each r epayment in.Robert
the term and he can lend it out to someone else. If the interest rates are the same then it makes no difference to the lender; he always gets £5000 per year as long as he lends the money again as soon as he gets each repayment in.
But that assumes the lender that is limited only by capital and not by any shortage of qualified borrowers. Are there any like that?
What, marriage? Yes, probably, at least in this country.
But mortgage interest relief? No, it wasn't always limited to 2 people. Pre-1988, Each *single* person really did have their own separate allowance, but a married couple had one single person's allowance between them.
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