Extending endowment term?

coopem

Hi

I have an interest only mortgage finishing this year but unsure which options make most sense.
I originally borrowed 35k but by making overpayments have just about halved that amount, so my under performing Endowment policy will just about cover the remaining balance, but I'm thinking of extending my mortgage term to maintain access to money for further extension work mortgage rate 2.5% so it seems quite good, but my main question is if it might be worth extending the endowment policy in the hope that endowment performance picks up in-line with what we hope the economy in general may do.
my latest endowment statement suggests extending the term to help cover shortfall and also suggests that there may be a final bonus but offers no indications of the possible amount, making making a decision all the more difficult, at what stage can I justifiably expect to know the value of any terminal bonus?

holly_hobby

The addition of a terminal bonus at maturity, is not and never guaranteed - neither is the future performance of the policy or the addition of attaching reversionary bonuses - which means that you could continue servicing the policy, in the return for little or no futher growth (notwithstanding the life cover and other benefits the policy may provide).

You may seek to extend the term of your mortgage (with your lenders agreement and supporting affordability), to give more time to pay off any shortfall, resulting from an under performing low cost endowment, rather than extending the actual policy term.

Personally, the only gte you have of repaying your mge at the end of its term is by switching onto a repayment (C&I) basis. Otherwise you could tsf as much as possible onto C&I, whilst making additional arrangements to repay the element left on IO (ie retaining the policy, and/or planning and making penalty free lump sum reductions over the remaining term).

Hope this helps

Holly

coopem

Thanks Holly

So much rests on the size or lack off any final bonus, do I really have to wait for the cheque to arrive to find out it value? by which time my options would be greatly reduced. I have of course also contacted the plan operator, wait and see I guess.

again thanks for the help

coopem

dunstonh

So much rests on the size or lack off any final bonus, do I really have to wait for the cheque to arrive to find out it value?

Yes. However, most providers will supply you with the final bonus accrued to date if you ask them. Some are fussy and will only supply it to an IFA. If you have an IFA you can ask them to get it for you. The final bonus is never guaranteed until maturity though.

coopem

Many thanks

the company concerned state that they are keeping anual bonuses low to concentrate on final bonuses so I'm keeping my fingers crossed.

Thanks again