3.3 Which Repayment Method?
- What is the client's attitude towards investment? Is the with
profits or unit linked option more attractive. Is the tax efficiency
of the ISA or pension preferred? Is the early repayment potential
of the endowment favoured. Are guarantees essential?
- The cost of the chosen method should be borne in mind. For example,
although a pension mortgage offers several advantages - tax relief
on premium, tax efficient investments, a life time pension - it
should be remembered that the client is effectively paying too much
for the product. This is the case because only part of the cash
fund will be used to repay the loan, but it is necessary to accumulate
the whole of the fund to be able to do this. The argument is different,
of course, if the pension already exists, or needs to be established
to top up existing provision.
- How relevant is the term of repayment period? For example, linking
to a pension product means looking forward to the loan being paid
off at say, age 60 or 65. Is this acceptable, or is the potential
to repay earlier more attractive.
- Is tax efficiency the most important criterion, in which case
would the pension or ISA mortgage be acceptable
|
|