To Surrender or not to Surrender???

widdy1510

Can anyone help us? We have a 115K mortgage on a house worth approx 425k with 7yrs left to pay. 20k is repayment and 95k is interest only backed by 2 underperforming endowments (could be a 13k shortfall).

We are just about to finish a 5yr fixed rate. We have 13k of credit card debt 5k of which we have just switched to a 3.5% life of balance so 8k is at a high interest rate. We are considering surrendering both of the endowments, which have a joint value of 33k.

We also would love to enlarge and refit our very sad old kitchen and will have to somehow raise the 10 - 15k we estimate that may cost.
My head is spinning from trying to juggle the best way to go about all this. I want the credit cards paid off as quick as poss.

We pay roughly £930 a month for mortgage and endowments, and cant afford much more than this, which makes me reluctant to convert all the interest only mortgage to a repayment, as it will be quite a jump, monthly, as we only have 7 years to go. We are both approaching our 50th birthday, so looking forward to not having a dreaded mortgage in the not too distant future. Husband is self employed and I work part time. Should we surrender policies, pay off credit cards, keep the rest for the kitchen, and maybe lengthen the years to maybe 10 - 12yrs to keep the monthly payment down. Or keep the endowments going, and convert the projected shortfall to repayment over 7yrs. We have 3k in shares and £1,800 savings . I have been mulling this over for weeks, and cant see the best and cheapest way to deal with it all.
We have hardly any disposable income after all the bills are paid, so we are sailing fairly close to the wind. I just dont know whether to be rid of these policies or stick with them for the last 7 years and worry about them later. We thought we would have our mortgage paid and a nice little nest egg from them, but doesnt look like that will be the case at all. Did go down the mis-selling route, but claim was refused! :mad: :rolleyes:

Any ideas would be gratefully received. Many Thanks :rotfl:

brasso

Just my view, Widdy, but I would put the kitchen refit out of your head at the moment. We'd all love a new kitchen but it just isn't on our radar at the moment.

Incidentally we are exactly the same age as you, and also have 7 years on our mortgage. (Er, you're not my wife are you? :eek: Where did that £13K credit card debt come from...?)

But seriously, I recently cashed in an endowment I had on another small property that I used to live in before before I married, and was horrified to find that I'd paid in a total of £12,500 and got only £11,500 back, after 10 years. I'd have been better off keeping the cash under my mattress. Personally I'd look to cash in the useless endowments and convert to repayment. You made an innocent mistake like me. Time to cut your losses and get out of it, I'd say. I would move heaven and earth to pay off my credit cards. So I'd cash in the endowments, pay off ALL the credit card debt, cut up all but 1 card, put the remaining cash into the mortgage and see where I stood then.

If you really are desperate for your kitchen you could MEW and extend your mortgage by a couple of years. Personally I wouldn't, but that's me.

I'm puzzled by your references to being mortgage-free, when you'll still have £95K to pay off in 7 years time? I would be attacking that now while you can.

In summary, consolidate, cash in your endowment chips, pay off the cards and stop throwing all that money away on them (between your I/O mortgage and your cards, your monthly interest payments must be frightening. No wonder you have so little disposable income. You're throwing away a huge pile of cash every month).

I know this isn't what you want to hear.

If you feel desperate -- think the unthinkable. Sell up and size down a little. Or even consider STR-ing (sell to rent). You could put £300K in the bank, or in a range of high-interest investments and rent a beautiful house for the much less than you're paying now (depending on area of course). In the meantime, we're likely to get a house-price correction over the next year or so, so you could then buy back into the market with cash at much better prices.

This last suggestion is only if you fancy a bit of risk!

I know I've made some tough suggestions but you do have £300K of equity there, so ultimately, you're not too bady off compared with some.

Good luck.