Do you HAVE to use endowments to pay off M'gage?

bob_dob

Thank you Holly, that is brilliant advice!!

bob_dob

Quick question- If the mortgage term ends very soon and the endowments do not mature until, August and November, what is the normal process between the date the mortgage ends (a few weeks) and when the endowments mature?

holly_hobby

Up to 6 mths is usually not too much of an issue re staged maturing endowmwnts.

Tell them to have all their income details to hand, and the maturity values of the policy - which will allow the lender to assess the situ.

Come back for a chat if needed.

Hope this helps

Holly

bob_dob

holly_hobby wrote: »

Up to 6 mths is usually not too much of an issue re staged maturing endowmwnts.

Tell them to have all their income details to hand, and the maturity values of the policy - which will allow the lender to assess the situ.

Come back for a chat if needed.

Hope this helps

Holly

It helps tremendously!! Thank you so very much!!

ValHaller

bob_dob wrote: »

Hi,

My friend's parents' (64 and 67) three endowments mature this year, the last matures 19th November. Their morgage was £21k (With Barclays/Woolwich) and the latest prediction is that the endowments will be worth approximately £15k so they will owe around £6k.

Paying off the £6k is not an option I'm afraid but they do currently have about £1,500 saved. I would like to know what is the best thing for them.

At present, the state pays the monthly interest under the SMI scheme (£150ish) and they pay the endowments of £50.

Someone helpfully mentioned on here that an option would be to get the/a bank to extend the terms of the mortgage, put the projected endowment payout of £15k in an interest paying account, allow the state to continue to pay the interest on the mortgage and continue to pay the £50 per month to pay off the capital.

I am looking at this and thinking that putting the endowment money aside is playing a game which is just not worth the effort - there are the arguments raised about tax payers funding mortgage interest for people with this sort of money in the bank - and may be the capital will render them ineligible for the mortgage assistance.

I think the way to go is to pay the mortgage down with the endowments and put £1000 of the savings to it also. This leaves a debt of £5000. Now if the government continues to pay the mortgage interest, they can still put the endowment £50/month to paying down capital and see the mortgage off in 8 years and 4 months - or sooner. If they can stretch to £83/month, then they are going to be able to see this off in 5 years.

Or playing fast and loose, not put any savings in, owing £6000 and offer £100/month to capital which would see the debt cleared in 5 years. They could continue for 2.5 years paying £100 made up of £50 they would have paid for the endowment and £50 from savings. At this point, they would owe just £3000 and only be able to pay £50/month having depleted the savings, but they would still be clear by 7.5 years

zzzLazyDaisy

bob_dob wrote: »

At present, the state pays the monthly interest under the SMI scheme (£150ish) and they pay the endowments of £50.

Someone helpfully mentioned on here that an option would be to get the/a bank to extend the terms of the mortgage, put the projected endowment payout of £15k in an interest paying account, allow the state to continue to pay the interest on the mortgage and continue to pay the £50 per month to pay off the capital..

The flaw in this plan is that they only get SMI because they are on pension credit which is a means tested benefit. One the £15k hits their bank, they will lose both benefits and the council tax benefit as they will be over the capital limits.

bob_dob

Fantastic responses from both of you, thank you!!

Apologies for mentioning the endowment in saving account plan, I was advised that the £15k is below the threshold for SMI but I never did get an answer for whether it would affect pension credit or council tax.

Just a side issue- once they pay off the mortgage and own the house, wouldn't this then count as savings so would then cancel the pension credit and paid-for council tax ?

brewerdave

No, owning property that they are living in, does not preclude them from any benefits.

zzzLazyDaisy

bob_dob wrote: »

Fantastic responses from both of you, thank you!!

Apologies for mentioning the endowment in saving account plan, I was advised that the £15k is below the threshold for SMI but I never did get an answer for whether it would affect pension credit or council tax.

Just a side issue- once they pay off the mortgage and own the house, wouldn't this then count as savings so would then cancel the pension credit and paid-for council tax ?

I think this is a side issue anyway, because my understanding is that lenders are generally refusing to extend an interest only mortgage for more than about 12 months where there is no repayment vehicle, to enable the borrower to sell the house and repay the debt. So by not using the endowment proceeds to repay the mortgage, they could be forced to sell their home or be repossessed. That clearly is not what they want. Only the lender can give the advice you are seeking concerning the possibility of extending the mortgage term, but at their age it makes more sense for them to pay off the mortgage debt as soon as possible and live within their means.

Fancy schemes for juggling money to maximise income from state benefits are fraught with difficulties and (in my view) not worth the loss of the peace of mind that comes with getting their debts paid off, and their finances simplified.

bob_dob

Thank you very much. It seems clearer to me now and I will pass this on.

One matter still confuses me though. If the mortgage term ends in 3 weeks but the final endowment does not mature until November, what happens in the meantime?