Overpay now or wait?

full-time-mum

We have an endowment mortgage and currently have a mis-selling complaint awaiting adjudication by the ombudsman. The investigator ruled in our favour but the IFA concerned is challanging - I suspect we are still in for more waiting for a final decision.

We have decided that we have to plan our finances based on the worst case senario - ie:no compensation.

To that end, we have been scrimping and saving - tarting and doing our own offset type idea. All interest, bonuses etc are put into our 'endowment shortfall fund'.

Up until last week, we were getting a better interest rate on our savings than our mortgage (I don't pay tax which has made this possible). The savings rate has just been reduced significantly, purely in financial terms, our money would be put to better use paying off some of our mortgage.

However, we don't want to jepodise any compensation which may or may not be forthcoming by reducing our mortgage. Surely, it shouldn't make any difference, but I just have a niggling feeling that they could look at the reduced outstanding balance and conclude that we aren't in such a bad position as we are making out. (Does that make any sense?)

The money has been earmarked for the mortgage and will be used to reduce the balance, its just a question of whether to do it now or wait who-knows-how-long for a final adjudication.

I just wondered whether anyone has any similar experience or can offer any advice.

Thanks

HCN

My situation was very different to yours, but I've read alot of the threads on here on endowment compensation, and I'm sure that some people have run into problems because they paid off chunks of their mortgage and this ended up being taken into account when compensation was calculated. Have a search around, I think there are some similar cases. Also, the FSA website has some case studies which look at how compensation is worked out in various circumstances.

In my case the current (2006) surrender value was taken into account, even though I stopped using the endowment for mortgage repayment in 2002 and had kept it going as savings. I had assumed compensation would be calculated on 2002 surrender value (which was really low) but this was not the case.

stanmoresaver

full-time-mum wrote:

The money has been earmarked for the mortgage and will be used to reduce the balance, its just a question of whether to do it now or wait who-knows-how-long for a final adjudication.

Thanks

I'd hang on- not based on any professional feelings- just the logic that a small differencial between the rates for a few months isn't worth the risk.

Interesting to see what others feel.

SS

AndrewSmith

I also think that you should leave the 'Endowment Shortfall Fund' as it is currently and wait until you know exactly what is going to happen re compensation.

At that point you can then re-shuffle things around as I would suspect you will be looking to change to a repayment mortgage at that time anyway?

Andy

full-time-mum

stanmoresaver wrote:

I'd hang on- not based on any professional feelings- just the logic that a small differencial between the rates for a few months isn't worth the risk.

Interesting to see what others feel.

SS

Thanks, that's my gut reaction too. Good to know I'm not being daft!

full-time-mum

AndrewSmith wrote:

At that point you can then re-shuffle things around as I would suspect you will be looking to change to a repayment mortgage at that time anyway?

Andy

We think that we will probably keep the endowment as a savings scheme/life assurance etc if it looks as though it will still make more money than we put in.
However, the downside to this is that we probably won't be in a position, at this point, to convert to a repayment - we would need the captial from selling the endowment.

I suspect that we will pay any compensation off the mortgage plus any additional money that we have managed to save. Our monthly interest repayments will go down and we will save the difference between new and old into the endowment fund. I guess it then is a sort of diy repayment.

I don't think we will be in a position to fully convert to repayment until our youngest is settled in school in a year or two.

Fingers crossed on the compensation front, it would take away some of the urgency to generate additional savings.

stanmoresaver

full-time-mum wrote:

I don't think we will be in a position to fully convert to repayment until our youngest is settled in school in a year or two. .

Many people in a similar situation to you will convert to part endowment part repayment- using a very cautous projection for the endowment.

This route needs professional advice and often is the best route.

SS