endowment maturing options

steven12lamb

we have three endowment mortgage's two of which mature next year and the year after, however our mortgage is not due to finish 2025.There is a shortfall in the endowments should we reinvest the endowments or pay towards mortgage and take out another savings plan to cover shortfall when mortgage is due in 2025?

The other part of our existing mortgage is a tracker on half percent above base rate.

M

holly_hobby

Well it all depends if you want to keep on paying interest on the full mortgage or not (if there are any early redemption penalties for partial repayment), your attitude to risk (in relation to mortgage repayment vehicles). And if you don't use to repay and invest the capital instead, whether there are suitable vehicles in the market place, that will generate a guaranteed NET return, in excess of the interest you will continue being charged on the outstanding mortgage borrowing you have chosen not to redeem over the same term.

If you choose to re-invest to increase the balance you have, you need to consider whether you have the capacity to absorb any loss/reduction of the invested capital. (i.e which would be a risk in any asset backed investment made, such as unit linked contracts, unit trusts, stocks, shares etc ..etc).

If you don't want this exposure, you are looking at cautious vehicles, such as cash ISAs, Nat Savings, deposit/savings accounts - with a lower rate of growth in respect of their cautious profile.

As you can see there are many variants that need to be considered if you are looking to increase the value of your funds on maturity, and as the capital is in relation to such a sensitive and important issue, I would recommend sitting with a IFA to discuss your options and the most suitable vehicle/s to meet the task, in accordance with your personal and financial circumstances, requirements and aspirations.

Hope this helps

Holly

silvercar

The safe option is to use the endowment payouts to reduce your mortgage, then keep the mortgage payments the same as the amount you are paying now plus the amount you are currently paying towards the endowments.

So you will be overpaying each month by the amount the endowments are costing you plus the interest on the endowment payout amounts.

eg if your endowments come in at 50k your mortgage payments would drop by the interest on 50k, add this to your endowment contributions of say 55 per month and you pay are paying a lot extra off your mortgage each month. work out if this is sufficient to cover the shortfall.

Check first that overpayments to your mortgage are allowed penalty free.

jaysb

I think Silvercar is right

Unlike Holly Hobby.......from my own experience of IFAs, I guess you can fathom out options and risks yourself, without lining an IFAs pocket

holly_hobby

jaysb wrote: »

Unlike Holly Hobby.......from my own experience of IFAs, I guess you can fathom out options and risks yourself, without lining an IFAs pocket

Not sure what the "unlike" refers to ?

But I would imagine that most uninformed individuals, would rather seek the guidance and advice of a professional, rather than choose to have a punt and "fathom" it out themselves, especially where there is a substantial amount of capital which is provision for generally the biggest debt of ones life ...

However, if the investor feels confident that they understand the risk profiles and options of the various investment vehicles in the market, then of course they may choose to execute their own portfolio without any professional guidance - professional advice is for those that don't wish to pursue this avenue.

H

jaysb

just like the informed IFA that sold you that great endowment with the shortfall ?

holly_hobby

jaysb wrote: »

just like the informed IFA that sold you that great endowment with the shortfall ?

Thats one hell of an ill-informed sweeping statement ... !

Lets not get into the discussion regarding investment performance not being guaranteed, or why endowment mortgages were effected by individuals and have failed to perform.:cool:

H

Dick_here

steven12lamb wrote: »

we have three endowment mortgage's two of which mature next year and the year after, however our mortgage is not due to finish 2025.

Now if that's not a mis-sale...

silvercar

!!!!!!_here wrote: »

Now if that's not a mis-sale...

Not necessarily. We have 3 endowments that mature at different times just because we have moved house. Each endowment matures 25 years after a house purchase, each new mortgage was taken with a 25 year term. As long as there are no penalties for making repayments when the endowments mature there is no problem.

Our first endowment matured last year and went to reduce the outstanding mortgage amount.