Mortgage shortfall in 9 years. What options do i have?

Sirlaughalot

I`m looking at a endowment shortfall of about 22K from the last shortfall notification letter i had. The shortfall will be required in 9 years time! In 10 years time i will be getting a gratuity of around £14K.

The investment is in a unit linked stock market fund i don`t want to surrender the policy as i do believe at some point in the next 9 years the stcck market will flourish again.

What options do i have come the end of the term if the short fall still exists( will be 58 years young then!)

Thanks

SL

want_to_save

can you afford to switch to a repayment basis now?

tanith

Convert to a repayment mortgage now, is that an option you could consider?

amnblog

Start overpaying your mortgage monthly now by as much as you can afford. (firstly checking there are no penalties with your lender for doing this)

Sirlaughalot

Thanks everyone for such a quick response. If come the end of the investment there is still a shortfall what happens then?

SL

Thrugelmir

Change the term of your mortgage now.

amnblog

If there is a shortfall the lender will want the funds.

ACG

Some lenders will allow you to extend the term if they can see the remainder is coming in soon enough - but we are 9 years away so that may not be the case then.

Personally i would look to overpay to bring the balance down or see if you can extend the term but if it is interest only you may find you struggle with that at the minute.

Sirlaughalot

Unlikely i will be able to transfer to a repayment mortgage so i`m looking to make a regular monthly payment on my endowment mortgage to clear the shortfall.

There are no penalties so is there any tools available that can show me what i need to pay each month to meet the anticipated shortfall.

Thanks

SL

Imma_Number

http://www.whatsthecost.com/mortgage.aspx is quite good.
If enter your balance, rate & term, select Repayment and then press Calculate. This will tell you what you need to get the balance down to 0 in the term.

If you select Interest Only and enter an amount higher than your current monthly payment it will tell you how much you will owe at the end of the term. Adjust this to try to get the remainder to be equal or lower than what you reasonably expect the endowment to pay out.

eg 1: £100,000 mortgage over 9 years @ 3% would require a repayment mortgage of £1058 pcm
eg 2: £100,000 IO mortgage over 9 years @ 3% would require a payment of £250 pcm to meet the interest. Overpaying by £180 every month for a total of £430 per month would bring the balance down to £77,714 after 9 years.

When interest rates go up you'll need re-do the calculation to make sure you aren't falling behind.

davenport151

I am in a similar situation and looking to transfer to repayment soon.
Have you checked the actual surrender value at the moment? In our case it was currently better than expected. Though I am looking to cash ours in.
I am assuming yours is also without profits or any sort of promise?