Offsetting endowment value against purchase price

PixieMoo

My partner and I sold our own homes about 5years ago and have been renting since. We're now looking to buy and have a deposit that amounts to 25% of property value. I also have a 16yr old endowment (that's on target) that I've kept going so my question is: what are the options for offsetting this against the purchase price?

Is it just a case of deducting the amount it "should" pay (i.e. the original loan amount) from what will probably be an interest only loan? I guess the fact it could return more is irrelevant at this stage?

Will get round to speaking to an advisor soon - just haven't had the time lately.

Thanks

The_J

They won't offset it. They will use it as a repayment vehicle for the interest only balance.

I.e if it will return £50k, they will let you borrow £50k on an interest only basis.

Some lenders won't offer interest only at all above 50% LTV.

PixieMoo

"They won't offset it. They will use it as a repayment vehicle for the interest only balance."

That's probably the angle I was thinking of, i.e. that £50k for example will come off the loan value and be covered by my normal monthly investment anyway. The remainder of the loan would then have to be interest only and covered by a new endowment?

EDIT: having said that, if the lender won't let us take an interest only option (because we only have 25%), would we be expected to pay the whole loan as repayment only? Or would they be happy to take the endowment value off first?

The_J

Depends on the lender, some will allow you to do part and part, some will want full repayment.

Taking interest only with a new repayment vehicle at 75% LTV is virtually impossible these days.

PixieMoo

Ok, so based on the higher end of what we might spend, our figures are:

Deposit = 25%
Endowment (based on covering original loan) = 25%

So all being well that's 50% covered (albeit based on the endowment maturing to minimum target).

Maybe if we dropped our sights by even just 5% then the lender might see the new LTV as being less than 50% and therefore be more amenable? I guess, like you say, it's a case of seeing how they each respond.

Thanks