Surrrenduring/Selling Endowment to allow us to remortgage - sensible or not?

Mslouise

I was wondering if some of you knowledgeable and impartial people could let me know what you think of the following:

We are based in Northern Ireland so have been hit with substantially reduced value of our house and therefore low LTV (house currently worth what we owe). We are currently stuck on a SVR with a part repayment and part interest only mortgage and 2 endowments which we have been paying into for almost 13 years.

Although we can afford our mortgage etc, but I feel rather vulnerable that we at the mercy of our mortgage lenders SVR and would also be happier on a straight repayment mortgage knowing our mortgage will definitely be paid out and to allow us to chip away more at the outstanding mortgage each month.

So, we are thinking of selling/surrendering our 2 endowment policies and using this to give us the equity/deposit to remortgage to a fixed 5 year straight repayment deal costing us no more than we currently pay and lasting 3 years after our endowment will be paid out but 3 years less than our remaining mortgage.

I got the policies valued yesterday by the assurance company (Pru) and believe this would give us 85% equity in our house based on 2 recent sales of similar houses in our street (one sold at the start of the year for £4000 more than what we need our house to be valued at and a few weeks back at £18,000 more.)

I've spoken to a broker who thinks it is viable and understands that it gives us more security but wanted to check someone impartial before going ahead and starting the process.

Thanks in advance!

ACG

I have literally scanned that message as im just about to run out the door but dont be too worried about the SVR, if the lender hiked up the rate there would be a lot of people who would struggle in the current climate, the last thing any lender wants is to be repossessing house after house.

They just want people who will pay on time without any issues.

Mslouise

Thanks ( & sorry for long post) - so you think sit tight and hopefully let the market and our situation improve for a while? It would be great if we were able to keep at least 1 of the endowments (even if frozen) and still switch to repayment in the medium term.

ACG

Hi, turns out im not running out the door. My lift is late.

Im not saying that is what you should do, im just pointing out that being on SVR as much as people do worry you have to think what would happen if they did hike it up.

Im also not saying that it wont happen - Bank of Ireland being a prime example. But personally if it were me, i wouldnt be all that concerned about being on SVR.

Mslouise

Thanks - yes I understand. I guess I've just become much more risk adverse with age.

Voyager2002

On the endowments: do a search for companies that buy (and sell on) unwanted policies like yours, since that way you are likely to get a good deal more than from the insurance company.

On remortgaging: be aware that if you move on to a fixed rate that will cost you, and most fixes are for a relatively short period of time. I am confident that interest rates will not move in the next year, so there is a risk that your fixed rate deal might expire just before interest rates go up, meaning that you would have paid for protection but not actually benefitted from it.

TrickyDicky101

Are you limited to what overpayments you can make on your existing mortgage? You may well find if you approach the lender that they are perfectly happy for you to overpay to one/both accounts each month, thereby reducing your outstanding balance and giving you an effective repayment mortgage.

Mslouise

Voyager2002 - thanks for that advice. It's specifically a a 5 year fix we are looking at. The interest rate isn't a lot less than SVR but it's affordable and means we know we can afford mortgage for next 5 years (bar something disastrous happening).

TrickyDicky101 - I've looked at that but the amount we could afford to pay extra a month isn't huge and it would take quite a few years to get us to the same LTV position.

A rough calculation suggests to me that in 2 years time, we may be able to freeze one endowment and surrender the other to give us a better LTV - I guess that would be the compromise but risks the fixed rates not being as good.