remortgaging advice wanted

saejtin

We have a mortgage with its fixed rate period finishing in May this year and £44000 still to pay. Our separate (unlinked) endowment will pay out in Oct 2015 and might be enough to pay off the mortgage but being more cautious will pay off 75% of it. So is there an obvious choice for a remortgage. I know enough to know we must avoid early repayment fees but get a bit confused with all the other choices. I'm thinking a mortgage discounted for 3 years might be the thing. Any advice would be appreciated?

kingstreet

Part endowment, part repayment on a two year fix or tracker which ends before October 2015?

Putting some on repayment means you'll have less of a shortfall from the endowment maturity and the two year term means the penalties will have expired by the time the endowment pays out.

Take the term of the mortgage over a long enough period that if the endowment doesn't pay out enough to repay the whole mortgage, the bit left over on repayment remains affordable.

Once the endowment premiums and the interest-only element end, that frees up those funds for overpayments to the repayment element, so you pay that off faster.

Thrugelmir

Your best options may lie with your existing lender. With a relatively small balance to remortgage. You aren't an attractive customer for many lenders. Also unless you find a product with miminal product fee and free legals. The cost of remortgaging to another lender may not be economical either.

saejtin

Thanks. I hadn't considered any sort of endowment (thinking these were a thing of the past and not recommended anymore) so this is very useful.

Once the endowment premiums and the interest-only element end, that frees up those funds for overpayments to the repayment element, so you pay that off faster.

I didn't quite understand this part - does this mean in this type of mortgage our monthly payments go down after a certain period (so we can then afford to make overpayments)?

saejtin

On further googling I think I may be getting my head around this!

We can use the existing endowment plus a repayment plan in a newly arranged mortgage with a lender. I was thinking you meant a new endowment plan at first. (Is it possible our payments could be less from May onwards with such an arrangement? - I was thinking we wouldn't have any reduction until 2015). Am I on the right lines or hopelessly barking up the wrong tree?!

Thrugelmir

Can you afford to overpay the existing mortgage on a monthly basis?

saejtin

No unfortunately not.

EMac_2

You could speak to an IFA about your endowment and whether its worth continuing to pay into it, other options such as to make it paid-up (freeze it) or even surrender (cash it in) exist but you should get advice on this to see if its your best option. Should you continue with the endowment until it matures and it achieves or is on target to achieve say £35,000 then as previously posted split the mortgage and keep £35,000 on an interest only basis and put £14,000 onto a capital repayment basis. You can then also choose a rate and term to suit your needs. Hope this makes sense.

saejtin

It is really what to do in May when the mortgage fixed period comes to an end that I'm considering (although it's true we haven't given much thought to the option of not continuing with the endowment having come this far!)

saejtin

On further thought I think we should consider the option of selling/surrendering the endowment (with advice naturally) so thank you for raising this option. I am somewhat amazed about how unthinking we have been about our money all these years (and not because we have been well off)!

jackomdj

Worth thinking about an offset mortgage. This will be at whatever rate now but once you get the endowment you will be able to offset the full value (or a high value) of your mortgage. It will mean you are not paying interest on your mortgage, you still have your money accessible if you need it.