Types Of Mortgages Flashcards
What are the three most common types of mortgages available?
Annuity mortgage/repayment mortgage
Endowment mortgage
Pension mortgage
What is the most popular mortgage type?
Annuity mortgage/repayment mortgage
In relation to an annuity mortgage/repayment mortgage, what do the monthly mortgage repayments go towards?
Paying the interest rate on the loan
Paying off the principal amount (capital) borrowed
In relation to an annuity mortgage/repayment mortgage, what is the main advantage?
There is little risk involved as at the end of the mortgage term the interest and principal amount borrowed are paid off
In relation to an annuity mortgage/repayment mortgage, what is the main disadvantage?
A mortgage protection policy is a compulsory requirement
In relation to an endowment mortgage, what elements does it combine?
A borrowing element and an investing element
In relation to an endowment mortgage, what elements does it combine?
A borrowing element and an investing element
In relation to an endowment mortgage, what do the monthly repayments go towards?
Paying the interest rate on the loan
Paying a premium into an endowment life assurance policy
In relation to an endowment mortgage, what happens to the premium paid into the endowment life assurance policy?
It is invested by an insurance company in the stock market
In relation to an endowment mortgage, what are the two main advantages?
At the end of the mortgage term the endowment policy is encashed to pay off the principal amount (capital) borrowed and any surplus money can be used for personal spending
A mortgage protection policy is not required as it is included in the premium
In relation to an endowment mortgage, what is the main disadvantage?
At the end of the mortgage term the endowment policy is encashed to pay off the principal amount (capital) borrowed, if the investment yield is insufficient to pay of the mortgage then the shortfall will have to be repaid
In relation to a pension mortgage, what elements does it combine?
A borrowing and an investing element
In relation to a pension mortgage, why is it popular with self-employed people?
As they are not part of a company pension scheme
In relation to a pension mortgage, what do the monthly repayments go towards?
Paying the interest on the loan
Paying a premium into a pension scheme investment policy
In relation to a pension mortgage, what happens to the premium paid into the pension scheme?
It is invested in the stock market
