The total interest to be paid on this loan would be approximately pounds 405580

The total interest to be paid on this loan would be approximately pounds 405,580.But if you have a flexible mortgage , and find you can repay capital of pounds 10,000 after just one year, you will save pounds 40,558 in interest payments, and lop 5 years and 7 months off the term of the mortgage.John and Penny Dablin illustrate just how a flexible mortgage can meet our changing circumstances. We can now expect to change employer, employment status, and career several times before what may only be partial retirement.Bonuses, lump sums, redundancy packages – these days we get plenty of opportunity to reduce or pay off our mortgages early. There are compelling financial arguments for doing this if it is possible.For example: if you have a pounds 100,000 repayment loan running over 25 years, at a current variable rate of 7.49 per cent. The snag is a sliding scale of redemption penalties ranging between 5 and 3 per cent of any amount repaid within the first six years.Meanwhile, our working lives have altered. Many carry penalties for early redemption.For example, Bradford & Bingley’s four-year loan, which is capped at 5.9 per cent, has a penalty of 4 per cent of the amount that is outstanding on redemption during the capped period.Elsewhere, Northern Rock offers a loan discounted by 2.5 per cent to just 4.45 per cent.

We expected to work to 60 or 65, then hang our hats on a pension

Mortgages were arranged with this in mind. Loans were structured on the premise that borrowers would enjoy regular, predictable and fairly secure income. Traditional “interest-only” mortgages, accompanied by with-profit endowments, had the great advantage to borrowers of evenly spreading the cost of house purchase.
The disadvantage of these loans, as many of us are now discovering, is their inflexibility. For your copy of the guide, sponsored by The With-Profits Bond Shop, call 0845 2711007. NOT SO long both our working and financial lives seemed so predictable.

Written by Nic Cicutti, this paper’s personal finance editor, the guide examines the arguments for and against investing in bonds It discusses the tax implications and where to buy a bond. At the same time, the vast bulk of your funds are still relatively secure.In today’s uncertain investment climate, that is not necessarily a bad thing at all.To explain with-profits bonds, one of the “asset classes” described in this article, `The Independent’ has produced a free, 24-page Guide to With-Profits Bonds. Or you might feel that the Russian economy has sunk so low that there are buying opportunities even there.In each of these cases, the money you are investing is money you should be prepared to lose. That may happen, but if it does, the vast bulk has been stashed away in a much safer place.The key word here is balance. By constructing a portfolio in this manner, including cash, low-risk with-profits bonds and pooled equity funds, you have raised your overall risk profile from a four to a five, six, maybe even a seven on the scale discussed earlier.

If you were prepared to try out something even hotter, it might make sense to take 5 or even 10 per cent of your total funds and look to something which offers the potential for more aggressive growth.Among the areas worth considering are the technology sector, where the ideas, industries, drugs and mechanical processes of tomorrow are being developed today.Alternatively, for contrarians, there are Pacific Rim economies, including Japan, bombed out at present but (claim some experts) due for a revival in the next few years. What is more, once an annual bonus is added, it can rarely be taken away.That leaves 25 per cent or more money With this, you can afford to take a few risks. For instance, you might want to pick out a few UK or European unit or investment trusts, or set up an index-tracking PEP (either in the top 100 UK shares or in the FTSE All Share).This part of the portfolio is what will add spice to the safer investment mix of with-profits bonds and cash. This should be up to 25 per cent of your money, or two to three months’ spending money.Then, up to 50 per cent could go into with-profits bonds, a relatively safe investment which holds a variety of assets, ranging from equities to property, fixed interest funds and even cash This money will deliver safe, if not incredible returns. Somewhere in the middle are with-profits endowment funds of one sort or another.Constructing a sensible, low-risk portfolio starts with setting aside a proportion of funds in some easy access account, say with a building society. At one end of the spectrum are bank or building society accounts – measuring one on our risk scale.At the other end, an eight on the same scale, are emerging market funds, or even, at 10, the capital shares of a split-capital investment trust.