Endowment Help - been given 2 options for calculating loss

m.r.davies

I'm sorting out endowment for my mum
winterhur have responded and are asking for 2 options

1) They work it out loss on based on a halifax standard variable rate
2) using exact morgage details, taking into account any changes etc

the policy was for 37k
its forecast to be short by 7k
its a bog standard endowment that hasn't been changed and has been running since 1998

still got the endowment running and have taken a 2nd mortgage to cover the loss, 8 years remaining on the endowment.

so my question is:
Is this a standard reponse after sending off the first letter complaining about shortfall?

which option shall i choose

apparently the 2nd one will take longer but they look into it in more detail

any help would be appreciated
thanks
Mark

Xbigman

Was/is she paying the Halifax SVR? If she has been paying a lower rate then taking option 1 might be beneficial. If not you probably want to take option 2.
Regards



X

m.r.davies

she was with the woolwich and paying about 6.1%

How much is the Halifax SVR ? do i go on the current SVR ?

EdInvestor

This is a very complicated calculation involving every single interest rate change over the whole life of the mortgage.

It's never been shown that one method or the other is preferable AFAIK.

If you can't supply the detailed info on all the rate changes you'd be better to just go with the standard Halifax SVR rate.

Have you considered surrendering the endowment using the money plus the premoiums to pay off the mortgage?

This is the way to go for many people.

Supply the surrender value of the endowment and the monthly premium and we can work it out. Presumably this is a unit linked endowment?If not, and it's WP, also supply the guaranteed sum assured and declared bonuses.

m.r.davies

EdInvestor wrote:

This is a very complicated calculation involving every single interest rate change over the whole life of the mortgage.

It's never been shown that one method or the other is preferable AFAIK.

If you can't supply the detailed info on all the rate changes you'd be better to just go with the standard Halifax SVR rate.

Have you considered surrendering the endowment using the money plus the premoiums to pay off the mortgage?

This is the way to go for many people.

Supply the surrender value of the endowment and the monthly premium and we can work it out. Presumably this is a unit linked endowment?If not, and it's WP, also supply the guaranteed sum assured and declared bonuses.

THanks Ed

Its a Unit Linked endowment
The surrender Value is £8686.53
Monthly premium is £108.73 (£19.66 is lfe cover etc) so that leaves £89.07

What would you say based on this info?

bernice_2

i have 2 endowment policies which wont make the total value.Does anyone know of a good interest savings for £20,500 (thats the current surrender value as of today.)
The policy is with Target Life Managed Growth

m.r.davies

Oh, one other thing
I have to get this information by tonight as the form has to be posted back tomorrow, so I would really appreciated any advice on this.

Thanks
Mark

ohmsoft

The calculation they use compares the interest only mort plus endowment with repayment - to be honest the differnce between the two methods is usually not as great as you may expect as applying them to both sides of the calculation tends to cancel it out.

Using Halifax SVR is often preferred as its much easier to carry out.

Using the exact circumstances can be time consuming as the precise interest rates need to be input for the enire history of the mortgage.

Without doing both calcuations its not possible really to identify which you would be better off with. I assume they've given you the choice to avoid you accusing them of picking the cheapest option.

It's got to be your choice.

m.r.davies

Thanks!

So i would need to know the entire history of the halifax SVR for the term of the policy?

I might just pick the Halifax SVR as its easier
Anyone want to comment on this? good or bad move?

ohmsoft

No, you don't need to know Halifax SVR yourself all companies are aware of it as it's used as a benchmark rate if the true one can't be located etc...

EdInvestor

m.r.davies wrote:

the policy was for 37k
its forecast to be short by 7k

So the maturity value is forecast to be 30k? What growth rate was that?

If you cashed in the endowment and used the proceeds to reduce the mortgage, increasing the monthly mortgage payment by the endowment premium then your return at the end would be 27,244 ( ie @ a 6.1% return),.

On that basis you would seem to be better off keeping the endowment, but perhaps you could posts some updated forecast maturity rates, as their figure looks quite high, perhaps unrealistically high if so much of the premium is taken up by the life cover.