Stuck in endowment trap - help!

barbara22

EdInvestor wrote:

Sorry Barbara, one more bit of info, what is the monthly premium you pay on your endowment?

Ed, as you may have also realised, please ignore my last post (#20) - our monthly endowment payment is £65.55.
The figure I had quoted was our monthly mortgage payment

Thanks Dunston - silly of me, must pay more attention!

EdInvestor

Hi Barbara,

Good news.

It looks to me that if you surrender the endowment, and use the lump sum of a bit over 12k to reduce the mortgage amount owed, and then add the 65.55 endowment premium to your monthly mortgage payment, that you will immediately reduce your shortfall at the end to just under 5,000 pounds.

To be specific 4,963. So that's a lot better.

This assumes you don't need to replace the life cover in your endowment and assumes you keep paying out the same money each month.

But I would hope you could do better than this, by remorttgaging to a lower interest rate for the remainder of the term.

I wonder if any of our mortgage broker colleagues could give an idea of what might be available for Barbara and hubby?

I'm assuming they'd be looking for the minimum mortgage of 25k, with a good ability to overpay without penalty.[That would assume 10k of the endowment surrender value was used to reduce the amount owed and the 2k left over could be used for immediate essential maintenance on the house.] Monthly repayment capacity in the 250 pound range ( assuming a little left over for insurance replacement).

It would be worth asking the Woolwich what they could offer in the first instance I'd have thought.

barbara22

EdInvestor wrote:

Good news.

Ed, you are pure gold! What a lot to think about, shall have to discuss your suggestions more with partner. And yes, how nice of you to think to ask if other people may have suggestions on mortgages.

Really really thank you for your efforts ((so far?)

Barbara and very grateful partner

MortgageMamma

Hi Ed

Just wanted to say thanks to you for doing all that for barbara. Your method is exactly what I would have recommended, and maybe the surplus shortfall could be made smaller still with a good medium term fixed rate mortgage.

Barbara. Apologies for coming into this thread so late but I've only just had the chance to read through it as I've been poorly.

What you need now is to speak to someone on your level who you can TRUST. Someone who si not afraid of taking out a pen pad and calculator and sitting down and explaining all this to you until you fully understand what you are doing. Be careful if you instruct a mortgage broker that they are authorised not only for mortgages but for investment class business if you want them to advise you on whether to surrender the endowment policy or not. You have to hold a different qualifiction to advise on investments you see.

You came to the right place to get ideas - hopefully this can all be sorted out for you and soon you will be able to stop worrying about the shortfall. Also, as EDinvestor says, once you do retire equity release could work really well for you, as you would never have to pay it back - if your property is in a regeneration area the property value will very like increase, giving you more equity and making it more attractive to an equity release provider - this will help you have a better lifestyle in retirement.

Regards

MM

barbara22

MortgageMamma wrote:

Hi Ed

Just wanted to say thanks to you for doing all that for barbara. Your method is exactly what I would have recommended, and maybe the surplus shortfall could be made smaller still with a good medium term fixed rate mortgage.

Barbara. Apologies for coming into this thread so late but I've only just had the chance to read through it as I've been poorly.

What you need now is to speak to someone on your level who you can TRUST. Someone who si not afraid of taking out a pen pad and calculator and sitting down and explaining all this to you until you fully understand what you are doing. Be careful if you instruct a mortgage broker that they are authorised not only for mortgages but for investment class business if you want them to advise you on whether to surrender the endowment policy or not. You have to hold a different qualifiction to advise on investments you see.

Regards

MM

Never mind stepping in late MM, yours and everyone's advice has been very useful. Sorry you have been poorly, hope things are on the mend now. You are right about sitting down with (preferably) an independent fully versed financial advisor, any ideas of any 'free' services which we could avail ourselves of? Obviously we can go to our present lender for free, but they have a vested interest in promoting and selling their own products. At the other end of the scale is going to a fee charging advisor - from friends' experience this can be a very expensive route - well beyond our means!

Just looked back through the thread and noticed again Andy Wallace's advice NOT to surrender the endowment - anyone got a crystal ball or at least a good instinct and feel for the money markets over the next few years? As Andy said, the fund may improve it's performance (yes, I know, or get worse as well value wise) - I just wonder whether to hold off for a couple more years and see how things are then, or at least watch market performances more closely.

Have also just noticed how many times this thread has been viewed! Considering most of the posts have been from me the originator, any-one out there who has been in a similar position, and/or has found these great people's advice useful? Really would like your input, I've been the centre of attention for too long, and I'd love to hear of other people's experiences - please do drop in with a quick (or long and slow!) post.

MortgageMamma

Not all advisers charge fee's - however you are right in that most IFA's will charge you a fee for advice on whether or not to surrender your endowment. I would say leave the endowment where it is until maturity then pay it off your mortgage - but although qualified, I am not authorised to advise on investments. A mortgage broker though is a different kettle of fish - there are plenty of them available that will work for commission only even on a smaller size mortgage such as your own.

AndyWallace

LOL.

I wasn't specifically saying 'NOT' to surrender it, I just did not want you to act on something I said, which could have caused financial hardship in the future.

I'm not an IFA, but I do see clients' in a similar situation and usually recommend a part and part mortgage, as it works out cheapest.

Every year you should get a statement from your endowment provider, which should give projected returns based on a certain percentage, maybe 4%, 6% & 8%. I would usually take the lowest return, ie 4%, and use that amount as the interest only element of the mortgage.

After a couple of years, you could review it, if the projected return worsened for example.

The point is, doing it this way ensures that you are pretty well protected from a shortfall on your mortgage at the end of its term, but if the market improves then you may be able to expect a bit of a lump sum as well.

Andy.

dunstonh

Not all advisers charge fee's - however you are right in that most IFA's will charge you a fee for advice on whether or not to surrender your endowment.

If there is a family relationship already in place with an IFA, you will usually find services like this are provided without charge. If there is no relationship in place then asking for a freebie may prove to be fruitless.

barbara22

AndyWallace wrote:

LOL.

I wasn't specifically saying 'NOT' to surrender it, I just did not want you to act on something I said, which could have caused financial hardship in the future.

I'm not an IFA, but I do see clients' in a similar situation and usually recommend a part and part mortgage, as it works out cheapest.

Every year you should get a statement from your endowment provider, which should give projected returns based on a certain percentage, maybe 4%, 6% & 8%. I would usually take the lowest return, ie 4%, and use that amount as the interest only element of the mortgage.

After a couple of years, you could review it, if the projected return worsened for example.

The point is, doing it this way ensures that you are pretty well protected from a shortfall on your mortgage at the end of its term, but if the market improves then you may be able to expect a bit of a lump sum as well.

Andy.

Thank you Andy - I see what you mean. Having had some discussion with my partner (whose general attitude unfortunately is to stick his head in the sand and wait until it goes away!), I think we will 'wait and see' a little while in this case.... Unlike the last time we saw 'wait and see' on our first mortgage shortfall letter which to our great cost we consequently ignored and when we later got the full facts and put in a (valid) claim regarding being mis-sold the endowment were promptly 'time-barred' being just months out of time!! Sorry, I haven't put that very well, but steam comes out of my ears when I think about it.

Enough.

Also thanks again to MM for that bit of extra information, although I have perhaps an unreasoning fear of 'mortgage brokers' due to the rogue who caused the problem just ranted about above. Will check out the FSA again, as I'm sure they provide lists of accredited brokers etc with their qualifications for given areas. Again, not that this is a guarantee of course :rolleyes:

barbara22

No family relationship with an IFA Dunston, but thank you for the thought.

Barbara