How will this work?

cazziej

Hello, just after a bit of information please.

I have 2 endowment policies for my mortgage. One matures on 13th March 2009, with a target of £12,960. This was taken out in 1984 when we bought our first house. Most recent information tells us the policy is on target to pay out around £16,000. We have another policy taken out in 1989 with a target of £7,540. These 2 policies together were to pay off our current mortgage of £20,500. This policy is due to mature on 01.11.2009. If future investments continue to grow at 4% we are predicted a £2,190 surplus on this one. Figures are also given for 6% (£2,460 surplus) and 8% (£2,760 surplus).

As the policies mature at different times, how will this work? When the first policy (target £12,960, estimated £16,000), will they use the WHOLE of the £16,000 to pay off this bit of the mortgage or will they just pay off the £12,960, or will be given a choice of what to do? If we are given the choice, and we choose to take the excess £3,000+, what happens to the mortgage until November 2009 when the other policy matures? Will the mortgage be reduced? Would it be worth continuing to pay the same amount for the next 8 months, or to pay less and pay the 8 months of premium upfront on the November policy.

Basically, I don't really know what I am talking about, but just curious as to how it will work, with having 2 different maturity dates. We bought our first house in March 1984 with a 25 year mortgage and then our 2nd house at the beginning of October 1989 with a 20 year mortgage.

Thanks in advance for any advice.

Best wishes

Carol

The last mortgage statement I can find at the moment is from 2007 and gives an amount owing of £23,628.94.

Robert_Sterling_3

I think that when the first one pays out then the first one pays out the lender gets £12,960 and you get the rest. When the second policy pays out the lender gets £7,540 and you get the rest.

I have assumed that you were on an interest only mortgage. I can see now that there is a bit more to it than that as in 2007 you owed £23,628.94 whereas I was assuming that at all times you would owe £12,960 + £7,540 i.e. £20,500. This being the case the terms and conditions may allow them to take more of the first, or second or both payments. Either way it looks as if you will soon be mortgage free. Enjoy.

moggylover

It would be worth getting an up to date statement of the amount owing on your mortgage first, and then settlement values for the two endowment policies. I did this last year with my own as the value of the investment was going down too much for my liking and I did not want to end up with a shortfall at the end of the term, and going by how badly the endowment faired during the last recession I decided not to leave it until maturity this year and cashed it then and paid of my mortgage.

I suspect that the first pay-out would be best all paid to the mortgage, and then carry on paying on the balance at as much as you can afford until the second payout as any overpayments would mean a bigger amount left over for yourselves in November.

However, worth watching the value of your endowments (which can usually be found on line) and possibly cashing both together at the first settlement date and clearing it all if the values are not doing as well as projected.

cazziej

Hi

Thanks for the replies, moggylover and Robert_Sterling.

I rang earlier to speak to Halifax who told the same as you did. Basically, the mortgage is up in September (don't know how this ties in!). I can either pay off the whole amount of the maturity value £15,000+ in March and then pay £5,500 when the other policy matures in November, or I can bank the £15,000 and pay the whole £20,500 in November. Alternatively, I can pay off whatever I like as long as the mortgage is paid off later in the year.

I asked what the current outstanding balance is and was told that it stands at £22,221,52 as around £1721 of it is left on repayment. A few years ago we added around £3,500 for home improvements and this is what this is.

With regards to the settlement value, both policies are with Prudential (the one due to mature in March this year was previously a Scottish Amicable one), how would I find the value online?

Thanks for your replies - food for thought!

Best wishes

Carol