Including the cost of life premiums in the calculations.

Limpecunious

First of all, apologies about clumsy thread title. ;-]

When the lender calculates whether or not you have been financially disadvantaged as a result of having been sold an endowment, they compare;
What you would have paid with an interest only, with what you would have paid via a repayment.
However, When they come to work out the total payment made for the repayment option, they also add to that, the cost of life premiums. Thus making it seem that Repayment would have cost more and therefore, your endowment was the “cheaper option,” and therefore you have made a “saving” by having had an endowment..
In my humble opinion, it seems grossly unfair that they should include the premiums for a product you never asked for, a product that you never had the intention of buying, and a product, that they admit in their letter to you, was Missold.

If they admit it was missold, how can they then include it in their Repayment calculations ?
Talk about having your cake and eating it


Limpy.

dunstonh

So, you are saying that you wouldn't have taken out life cover on your mortgage?

Also remember that back in the endowment days, life cover, of some sort, was often compulsary so you would have had it. If you feel that you didnt need life cover (i.e. single, no dependents, then you could tell them that and see what happens).

If they admit it was missold, how can they then include it in their Repayment calculations ?

They havent admitted that they have missold life cover. Just a mortgage option being repaid by an investment vehicle.

Ian_W

Hi Limpy,
The missold element refers to the investment element of the policy so IMO they're right. About 5-10% of your premium goes in life cover for the full amount of your mortgage, so if you or Mrs Limpy slip off the plate the mortgage gets paid off. If you'd gone repayment most lenders would have insisted, on joint mortgages at least, that there was life cover in place.

Endowment mortgages were cheaper than repayment and the fact that life was included rather than bought separately was one of the reasons why me and Mrs W bought into them as recommended by which?, that and the promise/projection/hope/expectation of much botte 25yrs hence. Little did we know they would go t1ts up in a bucket.

All in my humble opinion of course.

dreamylittledream

dunstonh wrote:

So, you are saying that you wouldn't have taken out life cover on your mortgage?

Also remember that back in the endowment days, life cover, of some sort, was often compulsary so you would have had it. If you feel that you didnt need life cover (i.e. single, no dependents, then you could tell them that and see what happens).

Actually life cover was rarely a condition of mortgage lending on a repayment basis - the majority of lenders did not insist on it (with the exception of the big four banks). It was however 'strongly recommended'.

To the OP - life cover only makes a difference to calculations if you were single with no dependants at the time of the sale (i.e that recommending life cover would have been bad advice as why would you need it? The mortgage would be repaid on your death from the sale of the property)

If this was the case then tell us who the lender was when you took the policy and I'll be able to tell you if it was a condition (I have a fairly comprehensive list )

If you were single without kids at the time and LC was not a condition of borrowing its worth challenging the offer as it will normally increase the compensation (the cost of life cover is one reason why repayment mortgages generally work out more expensive then endowments in recent times). IN some cases (where the borrower is fairly old or the endowment was medically rated) a decreasing life policy can be almost the same price as an endowment (crazy but true).

Oh and a complaint can be upheld purely on the basis that life cover was unneccesary - this is just as much a mis-sale as the policy being unsuitable on the grounds of risk.

Limpecunious

DLD
Thanks for that. At the time, I was Divorced with no dependants, and the lender/seller knew that. Lender was NaT West Home loans

a complaint can be upheld purely on the basis that life cover was unneccesary

In which case it appears it shouldn't be included in the calcs.

Anybody else been picking over the figures they receive from the sellers ?

Cheers
Limpy

dreamylittledream

Lifecover was never a condition on NatWest Homeloans.

It was however for RBS mortgages and if the compensation has been calculated by RBS (who now own NatWest) they have a tendancy to insist that life cover was a condition. As such you will probably need to get it in writing from NatWest. This is possible to get.

If you contact Natwest mortgages direct you should be able to get this. Although its probably worth challenging the offer immediatly whilst you get a letter confirming this...