End of endowment Confusion (by me)

antdon

Hi All

I have just received a letter from Aviva telling me that my endowment is approaching maturity on 1st June….

The endowment was a ‘Guaranteed Min Cost End’ policy taken out on 1986 with NU (now Aviva) of £16,500
Their estimated maturity inclusive of ‘payment towards shortfall’ is £12,100

I took out a second ‘top up’ endowment in approx 1991 to move to a larger house.
And the mortgage started again at 25 years finishing in 2016

Aviva say that the endowment is Assigned to the Halifax as they legally own the policy and that they must have the Halifaxs consent before they will pay out… And that I must get written consent and the original Deed of Assignment from the Halifax…

Does this mean that the Halifax will get the £12k and then demand the £4.5K from me… Or is this merely a formality and the money will be paid to me (with the expectation by the Halifax that I pay the full loan cost at the end of the final term (5 years away))

dunstonh

Does this mean that the Halifax will get the £12k and then demand the £4.5K from me…

Yes.

When assignment exists, it is paid the assignee (Halifax in this case).

antdon

Thanks for the reply...

I cant understand why they have contacted me if the money goes directly to the Halifax... Obviously they needed to let me know final maturity etc.. But they where asking for all kinds of proofs of ID etc....

Will the Halifax now contact me about the shortfall?

Should I contact the Halifax first?

I really cant get my head around the next sequence of events...

dunstonh

The fact the payment goes direct to the bank does not mean the money isnt yours.

Money laundering regs were adjusted (again) a couple of years ago to apply to maturities and surrenders.

Will the Halifax now contact me about the shortfall?

Halifax will contact you asking for full payment. They wont know about the shortfall until they receive a lower amount than they asked for. They will then ask you to make up the difference. You will continue to pay interest until the balance is at nil.

Auntie-Dolly

How would that work if the OP now has a new mortgage not due to finish until 2016? I'm in a similar situation (or will be soon!) and would also be interested in how it will work.

antdon

Many thanks again for the reply.

My mortgage currently has 5 years still to run. (and another endowment that is definately going to be short)

My current idea is to cash in the second endowment which will leave me with £30k out standing. Then remortgage with a repayment mortgage for approx 10 years. (unfortunately obviously extending the mortgage period by 5 years)

I think I will have to contact the Halifax to see how I can do this without getting stung too much for fees etc...

Any comments / ideas would be appreciated...

antdon

Auntie-Dolly wrote: »

How would that work if the OP now has a new mortgage not due to finish until 2016? I'm in a similar situation (or will be soon!) and would also be interested in how it will work.

I'm glad its not just me....
I do feel particulary dim at the moment!

Premier_2

Auntie-Dolly wrote: »

How would that work if the OP now has a new mortgage not due to finish until 2016? I'm in a similar situation (or will be soon!) and would also be interested in how it will work.

When you bought the second, larger property, then you would have repaid the first mortgage in full at the point of sale of the original property. The existing endowment would have been transferred to the new mortgage company. (assuming they needed it assigned - not all mortgage companies do e.g the Woolwich don't )

The current mortgage provider will get the endowment payout (from the older policy) this year and use that as a partial repayment. You will be advised of the outstanding balance and the revised payments due (since you would have paid off a sizable proportion of the capital). When the second policy matures in 2016, it will hopefully pay off that balance.

But chances are it wont unless you have been overpaying over the term somewhere (not reducing your actual payments in the last 5 years after the first policy matures would be one easy way to overpay at least something). Again check the terms of your mortgage deal. Again, e.g. the Woolwich don't care if there are overpayments made, but some lenders may not be so accommodating - in which case put the money aside elsewhere (a better MSE alternative anyway usually as you may get a better return than simply overpaying).

Either way, after the original term of the mortgage expires (and after the 2 endowment payouts are taken into consideration) the lender will come after you for any remaining balance.

Edit: You will need to check the original terms of the mortgage.
It could be, for example, that the lender only agreed to lend £16.5k for 20 years (hence repayment this year) and the remaining £xk for 25 years (repayment in 2016) to align with when the policies will pay out.
(Mine wasn't that complicated, but my endowments are not assigned - they just want the full amount back after 25 years ... and if they get some earlier by way of an earlier endowment payout, so much the better)

If in doubt, speak with the lender asasp. In todays climate, they are unlikely to be too hard pushing for repayment according to the original timing if that will be difficult, but you will have to continue paying interest if not repaid. The earlier you speak with the lender, the more accommodating they are likely to be with you

Edit 2: If you don't repay at the agreed time, any extention may be subject to revised terms / lending agreement. e.g. I have an amazingly low tracker rate at present and I can't see the lender agreeing to that past the originally agreed expiration date.

antdon

Many thanks for the reply Premier...

So.. You seem to be saying that the original endowment will be paid to the halifax. Who will then demand the shortfall and reduce the mortgage payments in line with the outstanding balance.

So... if I then use the the money from reduction in mortgage payments plus the money I was previously paying for the 1st endowment ... I wonder how close it would be to the shortfall on the second endowment....

Time to get some figures and get the calculator out I think!!!

antdon

I too have a really low tracker rate and if possible I would love to continue at the low rate.... And this rate is for the length of the mortgage

dunstonh

If you have time left and your policy is assigned to the lender (most are not) then you could always ask the lender to revoke the assignment. Then the proceeds come to you directly and not the lender.