Should i cash in my endowment

makeusmile

Hi All,
Kind of new to this and have a new years resolution to get my finances in order so help would be appreciated. My mortgage is in a poor situation due to poor advice by the same financial advisor. A mortgage for £35k was arranged with and endowment that currently has a shortfall, when additional money was raised to cover an extension adviser did not arrange to increase endowment so I now have a massive shortfall.

I have a £88k interest only mortgage @ 4.95% and an endowment currently with £10k surrender value, both with 9 years to run (guaranteed sum £19.5k).
We also owe £7k on credit cards. As i am 37 I am thinking of cashing in or selling the endowment and using the money to clear the credit card debts then remortgage for 25 years, probably to a tracker (currrently 3.49% with first direct for 2 years and 1.49 above B.O.E base rate for next 3 years) using remainder of endowment cash to pay the £2000 early redemption fee.
Basically is this my best option in my situation.

Thanks, any advice is welcome.

clairbear_3

Possibly worst possible time to cash in endowment
Worst year on record for FTSE
If you can afford to I would keep it going as a separate savings pot and find a better mortgage possibly do a cheap balance transfer to reduce card debts

dunstonh

mortgage for £35k was arranged with and endowment that currently has a shortfall, when additional money was raised to cover an extension adviser did not arrange to increase endowment so I now have a massive shortfall.

Some years back mortgage regulation was introduced that resulted in the provision that repayment vehicles could not be done by mortgage advisers but needed to be done by investment advisers. However, there should have been a warning about requiring a repayment vehicle and many lenders asked the question about what you were going to use, even if they didnt check. Most top ups since 2002 time have been on repayment basis.

Ironically, you are probably better off by not having paid into a repayment vehicle in that period due to the lower payments you have have benefited from due to recent events. However, it is something you need to sort ASAP as you may benefit from lower monthly payments but the lender is going to ask you back for the money in 9 years time.

makeusmile

Thanks Dunstonh,
The part i am struggling to understand is if I remortgage for the full amount (£88k) over 25 years is the original mortgage effectivly paid off via the new mortgage company or do I now need to run 2 mortgages, I was hopeing in effect to start again !!

EdInvestor

makeusmile wrote: »

I am thinking of cashing in or selling the endowment and using the money to clear the credit card debts then remortgage for 25 years, probably to a tracker (currrently 3.49% with first direct for 2 years and 1.49 above B.O.E base rate for next 3 years) using remainder of endowment cash to pay the £2000 early redemption fee.

Rather than remortgage immediately and incur redemption fees, better to use the money left over from clearing the credit cards to overpay the existing I/O mortgage until you can exit fee-free to a new repayment deal.

Post some info about the endowment, you never know, some are worth keeping.

provider
Guaranteed sum assured
Declared bonuses
Surrender value
Maturity date
Maturity forecasts
Monthly premium

dunstonh

When you remortgage, the new lender sends the money to the old lender so you end up with just one mortgage and one lender. Remortgaging is the perfect time to adjust the mortgage term. You should wait until you have no tie in on the existing deal though.

makeusmile

Hi Edinvestor,
Details available are:
Provider Friends Provident
Guaranteed sum assured £19985
Declared bonuses £2516.93
Surrender value £10'362
Maturity date 06/08/2017 (started 06/08/97)
Maturity forecasts-Not sure but was taken out to cover £35k
Monthly premium £80.10

Thanks for advice

EdInvestor

makeusmile wrote: »

Maturity forecasts-Not sure but was taken out to cover £35k

Please call them up to ask, as these are needed to make a comparison, also update the S/v while you are at it..

makeusmile

Hi Ed,
Figures have been updated today and are:
Guaranteed sum assured £22508 (their is a basic sum assured of £19985)
Declared bonuses £2523.23
Surrender value £10326
Maturity date £06/08/2017
Maturity forecasts 4%=£22900 5.5%=£25300 8%=£29900
Monthly premium £80.10

Hope these are ok.
Thanks
Richie

EdInvestor

makeusmile wrote: »

Maturity forecasts 4%=£22900 5.5%=£25300 8%=£29900

If you surrendered the policy and used the lump sum and premiums to pay off debt @ a rate of 4.95% you would have a guaranteed return at maturity of 24,592. It's likely that your endowment will not do as well as that, so there's little point in taking the risk of holding it.

Suggest you proceed as suggested above, paying off debts first then remortgaging later for a smaller amount.

makeusmile

Ok thats great, thanks for the advice all.

Richie