Re-mortgaging and endowment

Marsie

Hi,

I wonder if anyone could check my thinking on the best way to go about utiliising an endowment that is about to mature?

We have a £140K mortgage - £100k repayment, £40k interest only. This is fixed at 4.68% and the fixed term ends in May next year (whole mortgage term is to 2028). We can pay off a maximum 10% lump sum each year without penalty - although due to some overpayments, our monthly DD on this is £800, whereas the actual required payment is £750.

The endowment that was due to pay the interest only element matures in May this year. It is currently reporting at £34k, so short.

We also have two home improvement loans at 6.4% which have another three years left to run, with a balance of c.£3k (will be less if we pay off in full).

Given current interest rates, etc., my current thinking is that we do the following:

- Pay off the maximum lump sum that the mortgage company will allow without penalty for this year; at max., this would be £14k, I am a little confused as to whether this lump sum will be treated separately to regular overpayments, so the mortgage company might need it to be less than that? We would continue to pay the £800 a month.

- Settle the home improvement loans, and then put the £112 that we currently pay on those each month into whatever is the best interest prospect - ISA or regular saver, I assume.

- Put the rest in to the best rate ISA I can get - we won't need it until we re-mortgage, so could put it in an account that requires notice.

- Remortgage when our term expires, hopefully at a lower rate, converting the entire mortgage to repayment with no interest only sum. This would be at the final balance of the mortgage, less what we have in the bank from the endowment and the money we will put away from the home loan we are no longer paying.

We have at least 50% equity in the house, probably more. Actually, definitely more, probably around 70%.

Is the above sensible - I assume it is possible, around the remortgaging to full repayment? - or is there a better way to go about things?

Many thanks!

Thrugelmir

Seems a sensible approach.

Check what your lender classifies as "a year" and maximise the overpayment within what you are allowed.