What insurances do I need for my home

HappyIdiotTalk

Bloke_with_a_simple_life wrote:

Hello Happy...

Bit concerned on the mortgage - can you confirm that your £661 repayment is "Interest and Capital" or "Interest" only?

If interest only - how are you saving to cover the amount you borrowed to pay for the house?

I took out a 40k endowment mortgage mid '94 when I was 20 in preparation for getting a house (was still living with mum then... wish I'd actually just gone out and bought a house back them).

However when I bought my first house back in 2000 I decided not to use the endowment and simply get another mortgage (capital + interest), to pay for the full cost over 25 years. The endowment would simply be a nice bonus when it matured.

However, when we moved here 18 months ago, the mortgage went up dramatically. So to keep costs down I started a new mortgage (for 25 years again) split between a 70k repayment and a 50k interest only. I figured that at the end of the mortgage term I could use the 40k endowment to pay back 80% of the interest only, and simply find the remaining 10k somewhere else. I guessed that 10k in 25 years time probably wouldn't be to much trouble to organise.

However since the endowment isn't performing, I want to switch to 100% repayment. My plan is to cash in or sell the endowment. According to the L&G its worth £9,306.30 if I simply surrender it. However when they've sent me a quote I'll go here (found the link on the BBC's money website):

http://www.policypricesearch.com/cgi-bin/select/apmm_direct.cgi?action=polsub_display

And see what I can get for it if I sell it. According to a quote from the COOP-man who comes and sells us insurance and gives us quotes for mortgages, if I switch to a 100% repayment mortgage with the CIS, my premium will go up between £40 and £70 per month depending on the type of mortgage I opt for (base rate tracker or fixed rate). This is pretty much what I was paying per month for the endowment. But at least I'd know for sure that the mortgage gets paid off completely at the end of term. And I get a nice fat cheque today.

I will then use the cheque to payoff the 10k loan I've just taken out for the car, which frees up £220 per month, plus £65 for the endowment. I will obviously lose thousands in the long term, but right now I think its well worth it as it'll really improve our situation.

Actually I have a question, do I need to switch to the 100% repayment mortgage before I cash in the endowment? Or can I do it after?

Also there is a problem, when we took out the mortgage, Mel was in full time employment and earning a lot more money. So 3.5 times our combined wages was enough to qualify us for the deal. Now she's part time, we're a little short. The COOP man has gone away to see if he can pull some strings... But we might not make it. Gulp!

Bloke_with_a_simple_life

Hello Happy,

Ouch - this is not a simple or straight forward situation! I think that you need to do some serious budgetting and financial review. Although other people have suggested it and you don;'t seem keen - this is the only way to start fixing the problems.

THe drop of income you are experiencing and the growth in family expernditure are definately areas that need to be assess and juggled. Not knowing too much - but it looks as if you built a lifestyle before your family came along where all money was being spent on it - and have tried to maintain that, with less income and more people to feed, clothe etc etc. SOmethings are going to have to be sacrificied soon to stop you hitting the buffers in the medium term.

NOt an expert but, please go and make a visit to your local citizens advice bureau (find it using http://www.citizensadvice.org.uk/ ) before doing anything more! If you act hastily now, it may seem as if you are solving a problem, but end up creating much much more.

The fact that your Co-op Financial Sales PErson is "pulling strings" probably means that you are not suitable for the product that she/he is trying to sell you. Additionally - why did you select the co-op/CIS etc? May not be the best person/company to use. Maybe not the best link, but the IFA site at http://www.unbiased.co.uk/ might assist you. Have a loot around here, e.g. under the "Find an IFA" personal finance" links.

My advice in short for the mortgage is that you MUST be making repayments or savings EVERY MONTH that cover both the capital and interest which is owed. Going for just interest and not make adequate contingencies to pay for the capital is sheer folly and will, in effect, mean you need to sell the house at the end of the mortgage period to repay the initial capital. Not ideal.

I think that a face to face meeting with your CAB before signing any bit of paper your salesperson comes up with is essential. They will be able to assist and help you get through this financial mine field.

Assistance from people on here will help - as will reading all of the permanent articles Martin has written and linked to from the right hand side.

Post up any further questions queries etc. and we'll see what we can do to advise.

Good luck!

Regards.