Fixed rate mortagage overpayment

Reece16

To all you Financial Whizzkids,

I have a £173k 10yr fixed rate mortgage (4.99%) which allows a 10% overpayment a year. I have £10k saved in a fixed rate ISA currently paying only 3%. The mortgage is split at £43k on a repayment basis & £130k on interest only. Endowment policies are projecting a £30k shortfall on mortgage maturity. Should I be using the ISA balance to pay off some of the mortgage (if so, endowment or repayment element??), or should I pump more money into the ISA to off-set the shortfall and hope for better interest rates in remaining 7 years? Or is there any other smarter way to reduce the mortgage (switch more to repayment basis??) & address the endowment shortfall with 7 years to run and a current cash surplus after household bills etc of £200 a month?

Help please!

Reece16

Reece16

Was my question too dumb or too complex to warrant a reply?

I'm happy to be deemed a financial dumbo so if anyone does have a few words of advice, I'd gratefully receive it.



Reece

Peelerfart

OK first of all you aint dumb, it aint too complex, and I aint a whizzkid.

Having said all that what do you want.

There any many more questions asked than answered here .You are savvy enough to have saved 10K and to realise that your endowments aren't possible the way to proceed.

So first of all get some figures about endowment surrender and post em here.There are some very good guys here, who can help, if you help them.

SimbaSimon

Reece16 wrote: »

To all you Financial Whizzkids,

I have a £173k 10yr fixed rate mortgage (4.99%) which allows a 10% overpayment a year. I have £10k saved in a fixed rate ISA currently paying only 3%. The mortgage is split at £43k on a repayment basis & £130k on interest only. Endowment policies are projecting a £30k shortfall on mortgage maturity. Should I be using the ISA balance to pay off some of the mortgage (if so, endowment or repayment element??), or should I pump more money into the ISA to off-set the shortfall and hope for better interest rates in remaining 7 years? Or is there any other smarter way to reduce the mortgage (switch more to repayment basis??) & address the endowment shortfall with 7 years to run and a current cash surplus after household bills etc of £200 a month?

Help please!

Reece16

This looks fairly simple really if you ignore the endowment for now...

So your savings earn 3% but your mortgage is 4.99%. Therefore any interest gains on your savings is wiped out by the interest on your mortgage. I'm no expert on endowments but given that is the larger amount I'd look at paying some of the interest only part off first, although if both interest only and repayments are at the same rate it won't make much difference. It makes no sense to me to keep it in a ISA when you could be saving interest on the mortgage so if it was me I'd certainly put 5k+ into the mortgage leaving you with a good few thousand emergency fund. Once thats done I'd put any excess money each month put into the mortgage, at least until savings rates get back to being higher then the mortgage rate.

Reece16

Peelerfart wrote: »

OK first of all you aint dumb, it aint too complex, and I aint a whizzkid.

Having said all that what do you want.

There any many more questions asked than answered here .You are savvy enough to have saved 10K and to realise that your endowments aren't possible the way to proceed.

So first of all get some figures about endowment surrender and post em here.There are some very good guys here, who can help, if you help them.

Many thanks...2 separate endowments (one mine, one 'er indoors) 1 Zurich policy delivers £32k and 1 with L&G projects circa £42k. Both mature 12 months in advance of end of 10yr mortgage. I'm not wild on the idea of surrendering endowment policies (had to do that when 1st marriage went belly up) that have run for 12 years accepting their slipping projected end lump sum. Would prefer to let them run their course (unless the sums stack up well for surrender option).

MrsManda

I know nothing about endownments but before overpaying (which I think is generally a good idea as you will save a lot more on interest payments than you're earning in interest on your savings) you should make sure you have enough money available to cover you for 6mths if you lose your job, become serious ill etc... either in terms of savings, insurance policies, or work policies. Or whether your mortgage will allow you take the overpayments back without having to reapply for an extension of your mortgage.