To provide a clearer picture of the information in your Year End Mortgage Statement we have provided sample forms with comprehensive explanations of each section.
We can provide online assistance with the Mortgage Statement Summary, Mortgage Statement Transactions, Mortgage Statement 2007 Insert and Your Mortgage Statement Notes.
Important reminder
For customers with an interest-only mortgage, and customers whose mortgage term extends beyond their anticipated retirement date.
A - Interest-only
Your mortgage statement confirms if you pay all of your mortgage on an interest-only basis. This means that the monthly payments you make to us do not include any amount to repay the capital so your balance will not reduce.
Unless you arranged to pay endowment premiums with your mortgage payments under a special arrangement we offered in the 1980s, then your mortgage payments do not include any contribution to any other investment policy designed to repay your mortgage at the end of its term (an endowment policy or investment linked policy for instance).
Please be aware that it is your responsibility to make sure that you repay your mortgage by the end of its term.
If you have an investment policy in place, you should check regularly that it is still on track to repay your mortgage. You should also check that it is still sufficient for its purpose, as you may have increased your borrowings or your circumstances may have changed since you originally took out your mortgage.
If you have no investment policy in place to make sure your mortgage is paid back at the end of the term, we strongly recommend you ask your financial adviser for advice as soon as possible.
If you are unsure whether you have an investment policy in place to repay your mortgage, you should ask yourself, do I:
- have relevant policy documents?
- receive regular statements about my policy/ies?
- pay separate monthly premiums from my bank account?
If the answer to any of these questions is no, you should talk to one of our advisers, or to the adviser who arranged your mortgage, about changing to the repayment method and to consider whether your dependants have adequate protection in the event of your death or critical illness.
‘Part and Part’ mortgages
Your mortgage statement confirms if you pay part of your mortgage on an interest-only basis. If your mortgage is part repayment and part interest-only, then you should check regularly that you are still on track to repay the interest-only part of your mortgage by the end of its term. Please see the section above, Interest-only, for further guidance on repaying your mortgage.
Additional information on endowments only
The Financial Services Authority (FSA) requires that all insurers send out a letter (called a re-projection letter) which tells you if your policy is on track to repay the target amount and will show you the options available to meet any shortfall.
Other ways to repay an interest-only mortgage
In addition to the usual investment policies, you may have decided to repay your mortgage by other means. We have described some of these below and have included points you should consider:
Where you are intending to sell the property at the end of the mortgage term, repay the mortgage and move to a smaller property (downsizing) you should consider your ambitions for the smaller property. For example, a smaller home can cost as much as a larger one and you may find that after repaying the mortgage that you do not have sufficient funds to buy the property you originally thought you would be able to afford.
Where you are relying on the sale of other property (eg a second property that you rent out), you should consider the value of that property and any debts secured against it. Whilst house prices have, historically, followed an upwards trend, this is not guaranteed. Your property may not grow in value enough to repay your mortgage. You should also consider that your property may not sell quickly and sufficient time should be allowed towards the end of the mortgage term to enable you to receive the cash proceeds from the sale.
Where you are relying on an inheritance to repay your mortgage, you should consider the following factors:
- You may not receive the funds by the end of the term
- An inheritance can be greatly reduced if your relatives have to pay for long-term nursing care
- The amount of inheritance tax (IHT) you may have to pay
- Your relatives may decide to release equity in their property during their retirement thus reducing the amount of any inheritance.
B - Does your mortgage continue when you or your partner retires?
If you have a mortgage and/or a repayment vehicle that continues beyond your anticipated retirement date, you should regularly consider if you will still be able to continue to meet your payments after retirement. This is particularly important if you decide to retire early.
It’s worth taking advice in these circumstances to see if it’s suitable and possible to reduce the term.
If you are still in doubt, please refer back to your original adviser or check with us. Call us on 08458 501711* or visit your local branch.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.