Endowments maturing soon and need advice

debs611

Ok here goes. We have £105,000 mortgage outstanding of which £40,000 is interest only with the rest in repayment and both elements have 16 years to run. The current interest rate is 2.45 %.

We also have a secured loan with a balance of £2680 with just over 2 years to run at 9 %

I currently over pay our mortgage by £150 a month as I know the 2 endowments are going to pay out with a shortfall. One is maturing this month and I believe it will be £6700 minimum with the other one maturing in November which will probably achieve around £20,000.

I am trying to make money work as hard as I can so wondered if somebody could look over my plan as below and tell me if this is the best way:

When the endowment that matures this month pays out pay off the secured loan as that has higher interest. The £103 I pay towards that each month add that to my mortgage overpayment along with the left over amount from the first endowment. I plan to pay this off the repayment but as I believe that will save me more interest but up my mortgage payment to the same level as what I am paying now.

When November comes pay the other endowment off the repayment part as well and do the same, keep the same level of payment going which we can easily afford. I also intend to overpay the amount in that we have been paying each month for our endowments.

I know most people would advise to pay the interest only bit off but it is my understanding that I will save more interest paying off the repayment part first. I know I would have to be disciplined to overpay but I am just trying to make the money work harder for us so we can get rid of the mortgage. By the way I have no limits as to how much I can overpay each year.

If anyone can take a look at this and offer words of wisdom would be much appreciated, many thanks.

King_Slayer

Sounds like you have a good plan. I will definitely look at repaying the Loan ASAP. 9%:eek:

Are you in a fixed term? Is it possible to get a lower fixed rate when the loan is repaid?

debs611

No not in a fixed term anymore. No early repayment charge on the mortgage although I am waiting for a redemption statement from the secured loan to see how much there will be on that one.

magpiecottage

Assuming no penalty for repaying it early, clearing the secured loan first makes most sense as it will reduce the amount owing.

With the first mortgage, to some extent it depends how it is set up but realistically, simply using any surplus amount to reduce either loan will save on interest. If you then keep the total repayments to the lender the same the loan will fall (and be cleared) more quickly. If you up the payment to the lender by an amount equal to the endowmet premium which has stopped, it will be repaid even more quickly.

If you also increase it by an amount equal to the amount you were paying to the other lender then the amount owing will go down even more quickly.