Interest Only mortgage and cost of endownment

Maisie11

Could someone help me please with a typical cost. We are planning to move house. We have equity of £1m and are looking to borrow an additional £150k on interest only. We are joint applicants at 55 and 51 years old. We are in permament roles (me for 30 years and my partner for 17). I can find out easily how much £150k costs but of course we need an endownment type policy. We are looking for a term of 10 years. Could anyone give me a rough idea of how much an endowment would cost. Its our dream house. Our annual income is over £200k but we have hefty schools fees but no other debts apart from a repayment mortgage which has 3.5 years to run. We have approx. £50k in savings.


I have no idea whether the endowment is £100 per month or £500 and all the websites just seeing to be wanting us to go through all sorts of financial health checks. Of course I realise that they need to see whether its affordable but we have life assurance coming out of our ears. Protection on the current mortgage etc and I have a final salary pension scheme

kingstreet

There are no longer endowment policies available.

I suggest you ask your chosen lender what repayment vehicles it will now accept to repay an interest-only mortgage.

AnotherJoe

I can find out easily how much £150k costs but of course we need an endowment type policy.
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Of course? Not sure I'm following you there even if there were such things.

Whats the plan to repay at the end of ten years? Because, even if an endowment was available, it would essentially cost the same as a repayment mortgage.
But I presume you want IO as you dont think you can afford a repayment.

Confused ......

dunstonh

but of course we need an endownment type policy.

"Of course" does not apply.

The last mainstream endowment provider pulled out in 2004. Endowments themselves were obsolete by 1995. You don't need an endowment.

Even if you could get an endowment, with todays projection rates, the interest only mortgage cost plus endowment cost would actually be greater than the cost of a repayment mortgage. So, the "of course" option would be to have a repayment mortgage

OnTheRun

Maisie11 wrote: »

Could someone help me please with a typical cost. We are planning to move house. We have equity of £1m and are looking to borrow an additional £150k on interest only. We are joint applicants at 55 and 51 years old. We are in permament roles (me for 30 years and my partner for 17). I can find out easily how much £150k costs but of course we need an endownment type policy. We are looking for a term of 10 years. Could anyone give me a rough idea of how much an endowment would cost. Its our dream house. Our annual income is over £200k but we have hefty schools fees but no other debts apart from a repayment mortgage which has 3.5 years to run. We have approx. £50k in savings.


I have no idea whether the endowment is £100 per month or £500 and all the websites just seeing to be wanting us to go through all sorts of financial health checks. Of course I realise that they need to see whether its affordable but we have life assurance coming out of our ears. Protection on the current mortgage etc and I have a final salary pension scheme

As others say, endowments are no longer sold.
So how do you plan to repay the capital borrowed in 10 years time?

If you hope to save £150k over 10 years by sticking it under your mattress, then you need to be putting £1250 pm under there.

Presumably you will be planning to actually invest it, but if you want the surety of a bank account, then you might only earn 0.1% pa interest, so it's not going to grow by much.

Therefore you need to know what investment vehicle you will be using, and hence the growth/interest rate. Otherwise, give the extra money to the lender (like you would as a repayment mortgage), but be aware of any early repayment penalties that may apply, and then your interest rate will be whatever you are paying