Endowment.please Somebody Help Me Make A Decision

9shell

EdInvestor wrote: »

If you cashed the endowment in and used it to repay the mortgage @5% also paying in the premiums to maturity, the return would be 33,446, better than they are projecting at 6% and no risk.(Obviously you will get more as you would pay down the loan at 8% first.)

So I'd surrender it.You might like to try and see if someone will offer you more for it on the market, see if these people will give you a quote:

https://www.apmm.org

I too suspect you must be on a repayment mortgage. But in any case if you pay off the 10k loan and dump the endowment, that will liberate 100 quid a month to add to the DSS payment of 149 a month on the other loan. Reduce the larger mortgage by a further 15k from the endowment proceeds and you are probably in shouting distance of covering the total mortgage with no need for extra payments from you or arrears building up.

If you aren't, then a small extension of the mortgage term will probably do the trick, plus you will have an extra 61 quid a month to live on..

Hello Again EdInviestor

I have since learned from the Halifax that the original amount borrowed from them for part of my mortage of £30.000 (£181 per month), is on interest only and the £7000 arrears (£182 per month) , is on a repayment.

To clarify, The £30,000 Halifax loan and the £10,000 Amber loan, original amount borrowed are on interest only borrowed with the endowment, and the £7000 arrears Halifax loan is on a repayment. This probably explains why the payments are so high. Just wondered what your thoughts were in light of this?

I have been offered £27,522, on the private market for my endowment and am am now considering cashing selling but its still a frightening prospect but it seems the most sensible thing to do.

EdInvestor

Hi 9shell

Can you clarify what interest rates you are paying on the loans?

The endowment offer sounds good, suggest you go for that, on the assumption that the buyer will pay you immediately.

What's to be scared of in reducing debt? The endowment proceeds will pay off almost all of the original mortgage, and then the endowment premium can be diverted to overpaying the loans that remain

9shell

EdInvestor wrote: »

Hi 9shell

Can you clarify what interest rates you are paying on the loans?

The endowment offer sounds good, suggest you go for that, on the assumption that the buyer will pay you immediately.

What's to be scared of in reducing debt? The endowment proceeds will pay off almost all of the original mortgage, and then the endowment premium can be diverted to overpaying the loans that remain

Hi EdIvestor. Well, Im on 5% on the Halifax loan and 8% on the £10000 Amber top up loan.
I Agree, the endowment offer does sound good, the hard part is the letting go of it after 21yrs of paying into it, with four years left I guess I have to forget the unrealistic expectation and accept that it will not give me the original sum promised, it should have paid the mortage off and given me £10.000 on top. Im very angry and feel robbed. None the less its time to move on!!

EdInvestor

9shell wrote: »

Hi EdIvestor. Well, Im on 5% on the Halifax loan and 8% on the £10000 Amber top up loan.

If you were paying 5% on a 30,000 loan, the total interest payable p.a would be 1,500 p.a, ie 125 pounds a month.Not 181 pounds a month. Are you sure that the loan is not on a repayment basis? :huh:

BTW are there any penalties for paying off either of the loans early?

None the less its time to move on!!

Indeed it is.

9shell

EdInvestor wrote: »

If you were paying 5% on a 30,000 loan, the total interest payable p.a would be 1,500 p.a, ie 125 pounds a month.Not 181 pounds a month. Are you sure that the loan is not on a repayment basis? :huh:

BTW are there any penalties for paying off either of the loans early?



Indeed it is.

Thankyou Edinvestor for you time and financial wisdom, I will check with the Halifax again. Although when I recently queried my mortgage with them they definately said that the £30000 is on an interest only. I,ll also query possible penalties and update you on Monday.

God how I wish I had your knowledge then I wouldnt be in this mess in the first place! but I really want to get to the bottom of this and I appreciate your help.

9shell

EdInvestor wrote: »

If you were paying 5% on a 30,000 loan, the total interest payable p.a would be 1,500 p.a, ie 125 pounds a month.Not 181 pounds a month. Are you sure that the loan is not on a repayment basis? :huh:

BTW are there any penalties for paying off either of the loans early?



Indeed it is.

Hi Again EdIvestor. After your advice I called the Halifax I am on the standard variable rate learned that I am on 7% and not 5% as I originally stated. Sorry about the confusion. Still to find out about penalties regarding the loan. No penalties with the Halifax should it be paid off.

Something else I wasnt aware of was that my buildings insurance for which I am being charged £550, excluding contents insurance, is being added on to my mortgage payments and interest is going on the overall sum.

Granted, its not a huge sum in the grand scheme of things but I was shocked to learn that I am paying a staggering £550 a year when all along Ive been asking the Halifax for help with minimising my monthly costs they failed to raise the flag regarding my insurance costs at around £44 a month on top of the mortage payments.

When I pressed them on this they advised me to separate the insurance from my mortgage and pay separately by direct debit they then quoted me £320ish for exactly the same product. I was a bit peeved off that this wasnt offered to me earlier.

Id be interested to know what your thoughts are.
I,ll keep you updated. Many thanks.

EdInvestor

OK that explains it, half is the insurance (what a cheek :mad:) and the other part is the higher interest rate.

I suggest you do an internet search, first checking Martin's article, for cheaper buildings insurance.When can you swap policies? At the same time, if you need the life cover from the endowment replaced, look for a cheap deal for that as well.

Then collect all the info on any redemption penalties, so we can see what to pay off first with the endowment money after you've sold it.

Could I just clarify the loan position

Halifax
30k interest only @ 7% no redemption penalties
7k arrears repayment, also @7% ? penalties or not?

Amber
10k topup loan@8%
repayment or i/o?
penalties or not?

dunstonh

With NU, remember that the final bonus currently on the plan is not factored into the projections. Nor is the "promise" amount. This makes the projections lower than the likely figures.

Mr_helpful

Dunnstonh makes a good point about the projections.
I also am concerned that if the OP is on any means tested benefit eg income support, this could be affected by the cashing in of endowments and leave her with just as much shortfall on her monthly income.
Is the endowment still in joint names because that would have its own implications.
Is the OP going to work in the future when say the kids are at school or a bit older
So far you have had advice to cash in the endowment from someone who does not make their qualifications clear. If they are not qualified to give this advice then the are in breach of the financial services and Markets act 2000 as it forbids anyone who is not registered with the FSA to advise on investments. Potential 2 yrs in perison I think. If they are registered with the FSA perhaps they could say so.
DunstonH is probably the best qualified person on this thread to get advice from as he is an IFA
As far as the OP is concerned there is probably a lot to weigh up in the way of pro's and cons of cashing the endowment. I hope she gets it right in the end

EdInvestor

I'll just draw mr helpful's attention to the MSE rules on posting about investments.He doesn't normally post on those boards where we discuss the majority of investment issues, so he may not be aware of them.

Most of his post above is irrelevant as you can see.

Regarding DH's post about NU endowments, I would normally agree that such a policy might be worth keeping - though it's pretty marginal with interest rates at the level they are today.The TEP trader agrees that it's not a hopeless policy otherwise the offer would not have been made.

But in the OP's case IMHO this is a punt too far: her priority has got to be try to get the housing costs down to the level where they are covered by the benefit payments right now, and to stop the build up of arrears.The endowment is just adding unnecessary risk for someone who has no capacity to make financial gambles at all and who needs to shave costs to the bone.