Repayment advice

friedeggs_3

Hi all,

I really don't have a good understanding of mortgages so I am looking for advice.

I currently have £130K outstanding, approx £50K endowment, and £80K re-payment. I am fortunate enough to have £13K available to pay in a lump sum. My mortgage company tell there will be no penalty, but if I make this payment on the repayment side my monthly payments will reduce by about £100. If I pay it off on the endowment side my monthly payments will reduce by about £65. Obviously the former seems more attractive.

Before I decide which side to pay it to, could anyone explain why I would elect to pay it off the endowment side ? It puzzles me.....

Thanks in advance.

John

Cannon_Fodder

When you say "pay it off the endowment side", do you also plan to reduce your endowment contributions, to match, i.e. aim to bring the eventual endowment pay-out down to £37k...?

I suspect not. (Though even if you were, the difference might simply reflect the difference between the mortgage interest rate and the expected performance of the endowment.)

In which case, as you would only need £37k to clear the mortgage after making the lump payment, then in time you may get the £13k back, depending on the performance of the endowment...if it is still aiming for £50k.

Think of saving the £35 difference, investing it; would it turn into around £13k over the remainder of the mortgage/endowment...?

Seems a possible explanation.

With some endowments fluctuating between green/orange/red alerts due to the markets etc, it might be safer to reduce the endowment side, unless you can save the £100 to become a safety net...