Endowment shortfall/remortgaging - advice welcomed

JohnW

Hi there,
New to the site....

We have 2 endowments which are facing shortfalls. We'va made mis-selling complaints for both and won one (vs Nationwide) and lost the other (vs Hailfax).

Now we want to remortgage - we have a plan of what we think we should do and I'd like to know if there are any better ideas. The details:

- we have a £50,000, 25 year, interest-only mortgage with the Halifax, the capital for which is to paid back (in theory!) by 2 endowments....

- endowment 1 (with Norwich Union) is for £15,000, started 1987, maturing 2012. Projected shortfall (at 4% growth rate - worst case) is £5000.

- endowment 2 (Scottish Amicable, now Prudential), is for £35,000, started in 1995, maturing 2020. Projected shortfall is £10,000 (at 4% again)

Without knowing what to do at first, my wife started saving to cover the shortfalls and we now have.... £5000 cash . So we've covered at least one of the shortfalls.

Our plan, now that our mis-selling complaints have been dealt with is a basic one - convert the shortfalls to a repayment mortgage.

PLAN:
- use the £5000 cash we've saved to remortgage for £45,000 (ie reduce owed capital from £50k) for the remaining period of endowment 2 (taken out when we bought our house for £75k)

- the new mortgage should comprise of:

-- £10,000 repayment (to cover endowment 2 shortfall) - to end 2020
-- £10,000 interest-only - to end 2012 (paid by endowment 1)
-- £25,000 interest-only - to end 2020 (paid by endowment 2).

New mortgage will probably be a 2-3 yr discounted or tracker rate with no penalty at the end of the deal if we switch again.

[BTW have got a written quote for £225 from Halifax for the MEAF+Deeds dispatch ! - have noted the discussion elsewhere!]

We thought about using the saved £5k for home-improvements, but this was a more sensible idea. Are we better putting it in an ISA for example or do we save more in the long-run by reducing our capital from £50k to £45k?

Current mortgage with Halifax is costing us £260/mth, endowments are £20 and £70/mth. MrsW very much against surrendering the endowments.

Any alternative ideas out there?

Thanks in advance,

John

PS Have read the (great) Remortgaging guide over and over and am now ready to find a broker and get on with it.... any advice would be welcomed.

dunstonh

- endowment 1 (with Norwich Union) is for £15,000, started 1987, maturing 2012. Projected shortfall (at 4% growth rate - worst case) is £5000.

NU with profits endowments dont include the mortgage promise value or terminal bonus accrued to date on their projections. Plus, their returns are closer to 6%. This may not be doing as bad as you think.

- endowment 2 (Scottish Amicable, now Prudential), is for £35,000, started in 1995, maturing 2020. Projected shortfall is £10,000 (at 4% again)

Similar to the NU plan, Scot AM have a very good record with 95% of the endowments providing a surplus in 2005 and 96% for 2006 (with an increase in average surplus paid).

JohnW

Thanks for this. Certainly re-assuring for the NU endowment. In the red-warning letters we've got from them, they recommend we convert th £5k shortfall to repayment.

However, it seems only right to do at least something about the shortfalls, what do you think of our plan ? Thx again.

dunstonh

check your 2001 or 2004 bonus statements for how much your mortgage promise value is. The servicing IFA or NU themselves can tell you how much terminal bonus you currently have. Add them both to the value that is projected for a rough idea of the likely shortfall.

Projections are notoriously unreliable.