Last gasp attempt on Endowment Mis-sold

silvercar

Have things really changed? I have friends who took out endowments in the 80s and have kept them going.

The knowledge that the original endowments may not now pay off the original amount borrowed has just prompted them to not bother with a top-up endowment on the extra borrowings they have taken out each time they have moved. On moving they take a bigger mortgage so their costs have gone up, so they don't bother taking out a repayment vehicel and keep the mortgage interest only to keep repayments in check.

£200k interest only mortgage, original endowment for say 70k, nothing to cover the difference. All helped by the fact the lenders don't require endowments to be assigned to them.

Only saving grace is that HPI has meant that the LTV ratio will be under a third so the opportunity to trade down at retirement, provided the ducklings can be tipped out of the nest (into the BTL...), will be the solution.

Crazy_Saver

silvercar wrote: »

Have things really changed? I have friends who took out endowments in the 80s and have kept them going.

The knowledge that the original endowments may not now pay off the original amount borrowed has just prompted them to not bother with a top-up endowment on the extra borrowings they have taken out each time they have moved. On moving they take a bigger mortgage so their costs have gone up, so they don't bother taking out a repayment vehicel and keep the mortgage interest only to keep repayments in check.

£200k interest only mortgage, original endowment for say 70k, nothing to cover the difference. All helped by the fact the lenders don't require endowments to be assigned to them.

Only saving grace is that HPI has meant that the LTV ratio will be under a third so the opportunity to trade down at retirement, provided the ducklings can be tipped out of the nest (into the BTL...), will be the solution.

I eat my words silvercar:o

Do people today really do that? How is it possible? Do you not have to prove that you have a payment vehicle in place when you secure an interest only mortgage?

I am fascinated, but I have to admit it's all going a bit over my head now.............assigned endowment policy,HPI, LTV


Crazy Saver

defender_of_the_weak

I can personally attest to people having interest only with no repayment vehicle. basically the lender says 'do you know what you are doing' you say yes and they write a long letter explaining the dangers which you sign and return to stop nasty claims for mis-selling some years later. I have done this quite deliberately as have no intention of living in family home until potentially paid off in many years time. This house is an investment we live in as opposed to a home that goes up in value. Its all a matter of perspective

dunstonh

I'm on interest only as well. The lender hasnt got a clue what I am doing or have in place to pay it off later and never asked (C&G policy at that time).

EdInvestor

Interest only is much more flexible - you can create the effect of a repayment mortgage by overpaying it and if anything goes wrong you have a very useful cushion until things sort themselves again. Offset mortgages are another excellent innovation,as is equity release, of course.

The whole trend of control moving to the investor is very positive.If only this attitude would spread more quickly on the pensions side.

Crazy_Saver

EdInvestor wrote: »

Interest only is much more flexible - you can create the effect of a repayment mortgage by overpaying it and if anything goes wrong you have a very useful cushion until things sort themselves again. Offset mortgages are another excellent innovation,as is equity release, of course.

The whole trend of control moving to the investor is very positive.If only this attitude would spread more quickly on the pensions side.

I'm on interest only as well. The lender hasnt got a clue what I am doing or have in place to pay it off later and never asked (C&G policy at that time).

I can personally attest to people having interest only with no repayment vehicle. basically the lender says 'do you know what you are doing' you say yes and they write a long letter explaining the dangers which you sign and return to stop nasty claims for mis-selling some years later. I have done this quite deliberately as have no intention of living in family home until potentially paid off in many years time. This house is an investment we live in as opposed to a home that goes up in value. Its all a matter of perspective

Thanks for that guys. Now I'm all confused again.

I thought I had it all wrapped up as well. I had every intention of using a surrendered dud endowment to pay a lump sum off the loan and then switching to repayment. I thought interest only carried too much risk as I would be relying on investing which I don't have a clue about. I wish I had your knowledge and understanding;)

dunstonh

I thought I had it all wrapped up as well. I had every intention of using a surrendered dud endowment to pay a lump sum off the loan and then switching to repayment. I thought interest only carried too much risk as I would be relying on investing which I don't have a clue about. I wish I had your knowledge and understanding;)

You should probably still do what you intended. If you have investment experience and knowledge, with interest rates so cheap, it has been very easy to come in with better returns. If you average 15% a year (even with stockmarket crash) you can see why experienced investors wouldnt want to pay the mortgage off as they are only paying 6%. If you dont have the ability to invest or dont have a decent adviser then you shouldnt do it. Get it right and the rewards are great. Get it wrong and you lose money.

EdInvestor

Crazy_Saver wrote: »

I had every intention of using a surrendered dud endowment to pay a lump sum off the loan and then switching to repayment. I thought interest only carried too much risk as I would be relying on investing...

You have a load of choices with an i/o mortgage.

+You can run a parallel savings or investment ISA (or both) to pay off the mortgage at maturity - same idea as an endowment

+You can overpay the loan on a monthly basis, or using lump sums as they arise.This is an obvious thing to do if you are surrendering an endowment - overpay the lump sum surrender value, and then divert the endowment premium to overpay every month with no increase in outgoings. Overpaying means that you will pay considerably less overall to the lender,as the reduction of the capital owed by overpaying means less interest will be charged.

+You can run an offset arrangment where the interest on your lump savings is set against the interest on your mortgage so your whole payment goes to reduing the capital owed. [IF have an excellent offset where you can use money in ISAs].

+You can sell the property when the mortgage matutres and use the capital to repay the loan

+You can convert the remaining amount owed into an equity release mortgage so you don't have to repay any more during your lifetime.

Crazy_Saver

dunstonh wrote: »

You should probably still do what you intended. If you have investment experience and knowledge, with interest rates so cheap, it has been very easy to come in with better returns. If you average 15% a year (even with stockmarket crash) you can see why experienced investors wouldnt want to pay the mortgage off as they are only paying 6%. If you dont have the ability to invest or dont have a decent adviser then you shouldnt do it. Get it right and the rewards are great. Get it wrong and you lose money.

thanks dunston.

I think I'll definately play it safe. Can't afford to risk the little we have left.

Crazy_Saver

EdInvestor wrote: »

You have a load of choices with an i/o mortgage.

+You can run a parallel savings or investment ISA (or both) to pay off the mortgage at maturity - same idea as an endowment
.

Been too scared off by endowment to risk this one.

+You can run an offset arrangment where the interest on your lump savings is set against the interest on your mortgage so your whole payment goes to reduing the capital owed. [IF have an excellent offset where you can use money in ISAs].

Don't have enough savings to make a difference.

+You can sell the property when the mortgage matutres and use the capital to repay the loan

It's our home, we don't want to move:(

+You can convert the remaining amount owed into an equity release mortgage so you don't have to repay any more during your lifetime.

Never thought of this one.

+You can overpay the loan on a monthly basis, or using lump sums as they arise.This is an obvious thing to do if you are surrendering an endowment - overpay the lump sum surrender value, and then divert the endowment premium to overpay every month with no increase in outgoings. Overpaying means that you will pay considerably less overall to the lender,as the reduction of the capital owed by overpaying means less interest will be charged.

Reckon this is the one for us;)


Thanks for your help Ed:D