Cashing in of endowment and its effects on outstanding mortgage

Bazzaboy7_2

Dear MoneySavingExperts,
As you can see I'm a new member of the gang and have already benefited by using London and Country to find me a better re-mortgage deal - so thanks for that advice :j

My question is regarding the effect cashing in my endowment policy will have on my outstanding mortgage.
I was mis-sold but told that I was not due any compensation as the surrender value of my endowment (taken out 01/05/88) was more than the calculated repayment rate which I would have paid during the same period.

I have recently remortgaged over 16 years £118k - split £68k repayment and £50k interest only - on a 2 year fixed rate.
I have two endowment policies (both mature in 2013) one for £33k and one for £17k.

My dilemna is: If I surrender my two endowment policies with a cash-in value of approx £25k and use it to pay off some of the interest only element of the mortgage, can I still continue with the split (albeit now only £25k) knowing that there is no way it will cover the gap?

My intention is to wait until the 2 year fixed rate mortgage is complete then convert to a full repayment mortgage for the full value of the outstanding loan.

I understand that I will need life insurance (and maybe critical illness too) to cover the policies being cancelled along with the endowment policy, but will my lender insist on me having vehicles to repay the gap in the loan for the next two years until I can convert to a full capital and interest loan?
After all the loan repayment is not due for 16 years .......

I hope that my ramblings have not sent anyine to sleep - as you can tell I'm a real novice - but hopefully someone out there can help with some more great advice.

Looking forward to receiving it ...... Thanks for your time - Baz

EdInvestor

but will my lender insist on me having vehicles to repay the gap in the loan for the next two years until I can convert to a full capital and interest loan?

No.Lenders are not bothered about this these days.

BTW, in the old days they used to "assign" the endowment to the lender, so you couldn't cash it in before the mortgage matured.If your old policies are assigned in this way you may have to get them unassigned before you can surrender them.

Of course if you have remortgaged, this may have already happened.

Bazzaboy7_2

Hi again,

Thanks EdInvestor - I phoned the Lender and they are willing to keep me on the 2 year fixed rate AND cash in the Interest only element of the Mortgage - bringing my total loan value down and meaning that I pay less per month too !!! :T

Thanks again for the great advice.
Baz

Bennifred

Hi Baz! Welcome to MSE!
I am interested (OK - nosy!:o ) to know who London and Country recommended to you, and who you re-mortgaged with - do you mind telling us?

Ta

Bennifred

Bazzaboy7_2

No problem - it was the Halifax.
I was already with them and had just come out of another 2yr fixed deal.
Therefore a very low cost change as far as I was concerned.

The guys at L&C were ultra helpful and I would highly recommend them to anyone.

Bye for now .... Baz:beer: