Can I still buy an endowment for an I/Only mortgage

gonnafixit

We have a part I/Only, part repayment mortgage.

How do I save/invest for the £145k I/only part when Endowments no longer exist?

Do I use an ISA??

Please help!!

Thanks in advance.

Lea x

opinions4u

Why not go on to a proper repayment mortgage?

Gives you a guarantee that an investment plan wouldn't.

jaysb

opinions4u wrote: »

Why not go on to a proper repayment mortgage?

Gives you a guarantee that an investment plan wouldn't.

agree with above

i'm in process of cashing in my endowments - don't know why i didn't do it sooner. This and some other overpayment will mean that I reduce my mortgage by around 60% this year.

I'll be sticking with my interest only mortgage and use cash isa's/overpayments to clear the mortgage in next 5 years.

If I was starting afresh - then repayment would be the way to go for me

dunstonh

How do I save/invest for the £145k I/only part when Endowments no longer exist?

By typically paying a lot more than it would cost to be on repayment mortgage. Hence, not many do it nowadays.

Ask your lender to switch to repayment basis.

jamesd

Three ways to do this today:

1. pensions.
2. stocks and shares ISA.
3. outside any tax wrapper.

If you can wait until you're 55 and get the 25% tax free lump sum the pension route is very tax efficient, effectively giving you tax relief on your property capital payments. It's particularly efficient for higher rate tax payers or with salary sacrifice pension schemes. You need to pay in about three times what a repayment mortgage would cost because only 25% of the capital can be taken out. The rest remains to provide you with pension income whenever you need that.

The S&S ISA has the advantage of the ability to take out all of the money but the disadvantage of less favourable tax treatment than the pension lump sum. It's good if you can't afford to pay enough into the pension to get both a good pension income when you retire and pay off the mortgage.

Outside tax wrappers is mainly for when you've used your full ISA allowance and if pensions aren't appropriate for some reason.

For all investment approaches it's prudent to pay in a bit more than a repayment mortgage capital payment to create a nice safety margin. You also need to monitor the investments regularly and perhaps adjust how much you're paying in. Repaying gradually over a few years near the end also reduces risk of being in a bad market at the time you have to sell to pay the capital.

A repayment mortgage or voluntary extra payments is a low risk option that typically ends up costing you more than using investments. Many people prefer the certainty of this approach even though it is more expensive. The extra cost is because mortgage interest rates are lower than typical long term investment returns, so you don't get to save as much in interest with mortgage repayments as investments make long term.

Your signature says that you're struggling so it's perhaps worth considering accumulating a significant non-pension set of savings and investments before considering any pension or extra capital repaying. That can serve as a cushion in case of unemployment or income reduction, one you don't get if you've already put the money into property equity. I like many years worth of safety money that makes it easier for me to relax about investing as well. Then you'll know that you can make your mortgage payments for years if necessary even in bad times.

Thrugelmir

jamesd wrote: »

A repayment mortgage or voluntary extra payments is a low risk option that typically ends up costing you more than using investments.

Low risk. Would be better than investing, when another Deepwater Horizon (style incident) could happen at any time.

jamesd

BP's share price today is higher than it was in 2003 and it's been a regular high dividend paying company so that's hardly a reason not to invest. Nor is one company experiencing misfortune a sufficient reason to avoid all investments, companies or non-companies.

Even single prominent companies can and do fail, including companies in the 100 biggest shares in the UK, which have routinely gone bust or nearly so over the years. It's part of why using funds or other diversification methods is prudent.