Overpayment to cover shortfall?

RichardS

My "Red Letter" says at 6% growth my endowment policy will be £26,000 short at the end of the term. Can anyone tell me what I need to overpay on my mortgage every month to cover the shortfall - I have 17 years to go? (£26000/17)/12 = £127 but I guess with interest included it's less than that - how do I work that out? I got A level maths so I should know really....

EdInvestor

Hello Richard

It may be sensible to surrender your endowment and pay the proceeds into the mortgage plus subsequenbt endowment premiums, so it might not cost a lot extra. But best to post some info about the endowment, so we can see what's what:

Company it's with
Guaranteed sum assured
Total bonuses so far
Surrender value
Monthly premium
Maturity date
Amount of terminal bonus, if any

RichardS

What I was asking was how do I work out how much per month I need to overpay on the mortgage to claw back £26,0000 over 17 years, I'm not really interested in surrendering the endowment.

payless

RichardS wrote:

What I was asking was how do I work out how much per month I need to overpay on the mortgage to claw back £26,0000 over 17 years, I'm not really interested in surrendering the endowment.

will vary depending on interest rates
assuming mortgage rate of 5.5% (daily calc) you would need an extra £77.29pm
overpayment

( if rates go up, you actually need to overpay less - ie at
7%... £66.64 pm but
4%... £92.19% )

RichardS

Thanks Payless - that helps a lot!

blondie7

First of all if you think you were mis-sold the policy in any way you should get in touch with thoses who sold you the policy and you may be entitled to compensation.

Second if you can afford £127 a month are you not better off putting that in a savings account which will give you your short fall (but if you get compensation you will not need £127 a month) and all the interest you make on it will be yours.

RichardS

We're not getting any compensation but we do have a flexible mortgage with a £500 a limit on overpayments. So what's better - overpayments on the mortgage or stick the money in a savings account?

payless

Overpayments will save you the gross interest as charged, so compare it with the saving rate you would get ( less tax if applicable)

Access to savings is likely easier, whereas overpayments will likely be available ( assume you are with Nationwide?) its just a bit more hassle