Endowment shortfalls

CMcC12

In the late 80's i/we bought 2 x endowments to pay off our mortgage. At the time there was not even a hint that there would not be sufficient funds to more than cover the mortgage amount. It was not until both endowments were nearing their end that we began to see the red signals that there was potentially a shortfall. We had doubled our mortgage in 2001 to build an extension and left the endowments to cover the original mortgage as we had not been advised there was a problem at this stage. In March 2002 I was made redundant and out of work for 7 months - during this time my wife suspected that i was becoming depressed and my GP wanted to put me on antidepressants. In 2009 the first endowment matured with a shortfall. I tried to make a claim and was advised that although I believed the policy was with a large institution it was actually with a smaller company that had gone out of business and no compensation could be paid as the FCA did not cover the endowments that matured that early. The shortfall was approx £10k.
In Nov 2011 our eldest son had a mental breakdown followed in Feb 2012 with me accepted I was suffering from depression and anxiety for which I am still receiving treatment. In March 2013 my wife was sectioned under the Mental Health Act and in May the 2nd endowment matured leaving us with another £15k approx of a shortfall. I was trying to keep the family together and to date have done nothing other than bury my head in the sand regarding money matters regarding the 2nd endowment. In Jan 2015 my son had his second breakdown and in March 2015 I was sent home by my employer to resolve my mental and physical health. To date I am still not back at home and am worried sick that we may lose the house that we have worked for over the last 31 years. We have another 9 or 10 years left on the mortgage but no idea how we are going to pay this off.
Any constructive help would be appreciated - i do not need the people who knew better and opted for a repayment mortgage to respond as hindsight is a wonderful thing.
Thank you.

McKneff

but we were sent 'red' letters on a regular basis to let us know about the shortfalls. The time to do something was then, not borrow more moneu for extentions.

There was no such thing as compensation and your 'claim' wouldnt have done you any good anyway, the complaints resulted in putting you in the position you would have been had you not taken the endowment out. So you werent any better off..

There is nothing you can do now apart from grab it wll with both hands, sell the house, pay off all your debts, owning a house is not as big a deal as lotsof people think...... Rent with peace of mind and concentrate on getting better, thats my take on it anyway

AnotherJoe

I presume stepping up payments to pay off the deficit over the next ten years is a non starter?
In which case how much is the house worth?
It now has had a large extension, I would assume its dramatically increased in price so perhaps you could downsize into a smaller house that you own in full and lose all the stress and hassle you are currently feeling?
Failing that, sell up there must be a good chunk of equity there which will perhaps help you get a small mortgage on a smaller house (or a house somewhere cheaper)
It seems you bit off more than you could cope with 20 years ago, and there isn't necessarily going to be a magical way to allow you to keep this house but getting shot of the debts and the pressure in clearing them might leave you in a better position psychologically?

dunstonh

At the time there was not even a hint that there would not be sufficient funds to more than cover the mortgage amount.

Although by the late 80s, there were risk warnings on the quotes and documentation warning that was a possibility. Although it as a possibility played down as at that point, no endowment had ever fallen short.

We had doubled our mortgage in 2001 to build an extension and left the endowments to cover the original mortgage as we had not been advised there was a problem at this stage.

It was the early 2000s that endowment statements started showing shortfalls.

In 2009 the first endowment matured with a shortfall. I tried to make a claim and was advised that although I believed the policy was with a large institution it was actually with a smaller company that had gone out of business and no compensation could be paid as the FCA did not cover the endowments that matured that early. The shortfall was approx £10k.

This means it was sold prior to regulation. It isnt to do with the maturity date bu the commencement date.

We have another 9 or 10 years left on the mortgage but no idea how we are going to pay this off.

Use the maturity value to repay part of the mortgage and then increase your monthly payments to a level that will make up the difference in the remaining years. This should be very easy for you to do as interest rates are so low. So, there should be lots of scope without impacting on your living standards.

i do not need the people who knew better and opted for a repayment mortgage to respond as hindsight is a wonderful thing.

When you bought your mortgage, Which? had a best buy endowment. Newspapers were pro endowment and had this site existed, it would have had a best buy endowment too.

Whilst a small shortfall is inconvenient, one of the benefits of endowments was lower monthly payments. A typical mortgage+ endowment was around £20pm lower than a repayment mortgage plus life assurance. £20pm over 25 years is £6,000. So, its not all bad news.

Voyager2002

For a start, do as your employer asked and use the time to sort out your health issues. That means that you should now do something sensible about the mortgage and then stop worrying about it. What is most important is that you get yourself well: and the amount of the shortfall is relatively small in relation to your probable earnings over the next ten years.

Doing "something sensible" has to begin with some more information. What rate of interest are you paying? You need to consider whether you could invest the funds from the endowment in a way that would yield more than you could save by using them to part-pay the mortgage and reduce your interest bill.

I also suggest that you find out what your house is now worth, and consider whether you could be happy in a smaller or cheaper property. You might also consider whether you are likely to receive any pension funds before the end of the mortgage (a lump-sum draw-down might do a great deal to shrink that mortgage).

CMcC12

Thank you for your response.

You have just made me feel even more stupid/inferior.

As far as I can recall we had not received a "red letter" before we remortgaged to build an extension. I was then made redundant and started to suffer from depression and low self esteem so was not in a good place and buried my head in the sand when the red letters started to come.

kelpie35

Owning your own house is not the be all and end all of life.

You and your family's health is far more important.

You have asked what to do...........put your property up for sale and get the best price possible............clear your mortgage ............clear any debts..........find a suitable property to rent..............and start to enjoy life.

Thrugelmir

CMcC12 wrote: »

ore we remortgaged to build an extension. I was then made redundant and started to suffer from depression and low self esteem so was not in a good place and buried my head in the sand when the red letters started to come.

Virtually everyone has low points in their life at some point. Don't take comments made personally. You are where you are. There's no turning the clock back. All you can do is look forward and take the best course of action which suits you. There's no wrong or right solution. Question of personal choices.