Endowment misselling settlement and mortgage questions

witchypoo

I recently complained about the misselling of the endowment on our mortgage - we have the mortgage with Nationwide, £32000 borrowed, balance outstanding £32313.10 with a current interest rate of 6.99% and 9½ years left to run on it.
The endowment was sold to us by the Co-op (CIS) a month after the mortgage and we switched from whatever we had with Nationwide at that time to CIS since they were so persuasive. I won't go into the reasons for my complaint but suffice it to say we were successful but they are only prepared to offer us £1197.03 to restore us to the position we would have been in had we taken out a repayment mortgage. I'm not sure whether this sounds right or not so would appreciate any advice as to whether we should just accept or whether we should take it to the FOS.
The details of the endowment policy are as follows:
basic sum assured £13,728
Guaranteed Death Benefit £32,000
Current Surrender Value as at 24 May 2007 £13,095.40
They've also said they will pay any charge that our existing lender makes for converting an endowment mortgage to an equivalent repayment mortgage - or possibly another lender's fee's should we go with them. They will not, however, pay the fees "that are a result of (y)our current mortgage being changed (rather than converted) because you decide to re-mortgage".

Now, what I need is some good advice. What should I do once I have sorted out the settlement? Should I surrender the policy, pay the lump sum into our current mortgage and then convert the rest to a repayment mortgage, or should we re-mortgage and do as above? Which would be our best option? Another option would be to convert to repayment but keep the endowment policy going for the life cover, and the lump sum at the end of it. Course, I have no idea what our new mortgage payments are likely to be so to reduce it with the cash in idea sounds better. I obviously have no idea whether this endowment will 'pick up' along the way and actually have a bigger pay out and I am not sure whether it is worth the risk.
If I do cash it in, how much is life cover likely to cost us for joint cover to protect the new mortgage?
Sorry thats a lot of questions all at once, I hope it can be made sense of.

witchypoo

Thoughts, anyone?

EdInvestor

witchypoo wrote: »

.... suffice it to say we were successful but they are only prepared to offer us £1197.03 to restore us to the position we would have been in had we taken out a repayment mortgage. I'm not sure whether this sounds right or not so would appreciate any advice as to whether we should just accept or whether we should take it to the FOS.

It's worked out to a set formula, so you should accept it.

The details of the endowment policy are as follows:
basic sum assured £13,728
Current Surrender Value as at 24 May 2007 £13,095.40

Please also post the declared bonuses, monthly premium, maturity date, and maturity forecasts of the policy.

Should I surrender the policy, pay the lump sum into our current mortgage and then convert the rest to a repayment mortgage

That's a possibility, but more info needed, see above.Another possibility is to reduce the loan size with the compo and surrender value and then use the endowment premium to overpay the i/o mortgage.That's a bit more flexible than a full repayment. Offsetting using the cash pile is another possibility, again using the endowment premium to overpay.

If I do cash it in, how much is life cover likely to cost us for joint cover to protect the new mortgage?

You can easily get quotes on the internet through the many comparison sites, and it's sensible to do so, as you can then factor that cost into the calculation.

You could also see what others think about the policy by trying to sell it through the TEP traders. If no offers, that's an indication it's a dud.

https://www.apmm.org

witchypoo

EdInvestor wrote: »

It's worked out to a set formula, so you should accept it.

Thanks for that, I will get on and send the acceptance form

Please also post the declared bonuses, monthly premium, maturity date, and maturity forecasts of the policy.

My most recent update letter was dated March 2006, I just rang for an update on Total annual bonuses but they told me it would be due November and that last November's update must be running late. They offered a surrender value but since they did this for me a month ago I told them not to worry. The Total Annual bonuses up to Nov 2005 were £5560.70 with the most recent at that time being £82.30.
The monthly premium is £51.50, the maturity date is November 2016 same as mortgage.
The projections were as follows:
4% each year: £22,900.00
5.75% £26,900.00
7.5% £31,600.00

It states these were calculated as at 9th Feb 2006.

Another possibility is to reduce the loan size with the compo and surrender value and then use the endowment premium to overpay the i/o mortgage.

When you say 'use the endowment premium' I take that to mean pay the endowment premium to Nationwide instead as overpay? That would work out at almost £6000 over 9½ years if that's what you mean. I'd be looking at having about £18000 mortgage to pay back once the surrender value and compensation had been deducted so I'm not sure this would work. Oh I guess actually that if I were paying Interest Only on the lowered mortgage and kept up the mortgage payments to the level they are now, that could work. I currently pay £182.06 a month at 6.99% on the amount borrowed. Perhaps you can help make sense of it all for me. I'd still need to factor in life cover. I will look into that to help as you say in the calculation.

You could also see what others think about the policy by trying to sell it through the TEP traders. If no offers, that's an indication it's a dud.

www.apmm.org

Thanks I am looking at that site now. Is there anything I should be wary of, much chance I could get scammed?

I worked out premiums I have paid amount to around £9600 which added to the bonuses come to around £15000. What sort of figure should I be looking for from the TEP traders? I'm sorry I need babysitting on this as you can understand I'm scared of this kind of risk. We don't really have much in the way of savings you see.
Thanks for taking an interest, and for all your help.

camstop

witchypoo wrote: »

Thanks I am looking at that site now. Is there anything I should be wary of, much chance I could get scammed?

Take a look at this thread and the other link that's on the last post in the thread.......

http://forums.moneysavingexpert.com/showthread.html?t=402552


HTH :beer:


Edit: I just noticed you posted on the second link Witchypoo

witchypoo

Thanks for that camstop, now I am in the same position you were in I can appreciate the value of your experience. I've now posted my policy details on apmm.org and will be sitting back and waiting. It's a bit of a nailbiting position to be in, I certainly hope we can sort out this mortgage and not be out of pocket unnecessarily.
Eagerly awaiting Ed's thoughts! :hello:

EdInvestor

Hi Witchi

If you surrender the endowment and use the money to reduce the size of the current loan and then increasae the mortgage payment by the amount of the endowment premium to maturity, your eventual return will be 31,829, which is a lot better than the CIS projections.Obviously you would get even more if yoiu use the compo money to reduce the loan as well.

The only difference would be that you don't have the life cover any more, but these days that's pretty cheap to replace.

I would suggest you bin the endowment and use both the surrender value and the compo to reduce the mortgage, and then overpay it with the existing mortgage payment plus the existing endowment premium.Your outgoings won't change, but I suspect you'll be delighted to see how rapidly your loan vanishes if you follow this route.

witchypoo

Wow thanks Ed I feel so much better now :A and it will be even better if I get more than the surrender value from the TEP traders. Thanks for walking me through it. Yes it will be astonishing to see the mortgage finally go down instead of up, I wonder whether I should talk to Nationwide about our plans or try to change the interest rate? Are they likely to charge us if we pay off a chunk of it or make regular overpayments? More questions lol

camstop

I did it the way EDInvester described and found in my case i could pay all the remainder with a fixed 5 year deal by upping my payments a bit.

Now i will be mortgage free in 2012 as opposed to worrying till the end of 2015 about a potential £10k shortfall or at best just managing to scrape the required amount with the terminal bonus.

More than anything it's not worth the stress and well worth converting for that reason alone.

:beer:

witchypoo

*bump* - anyone have any experience with this sort of thing?

JoeK_3

It is common practice to nudge TEP buyers to increase their offer.

It looks like there is great interest in your policy and you can take advantage of that.

Contact all the potential buyers and ask them to increase their offers.

JoeK