Endowment Shortfall

Jordy45

Hi
I'm new to the forum and this query will have been done to death I'm sure.
Our mortgage endowment pays out in November and will leave us with a £9k shortfall to pay the full mortgage off in March (rest is repayment).
2 questions
a) What would you do with the endowment money before March to get a bit of interest - or is Premium Bonds the best option?
b) The £9K shortfall - best way to deal with this with the Building Soc?


Thanks for any help


Ian

jaybeetoo

What is the endowment worth?

Jordy45

Hi, it's roughly £37K

AnotherJoe

Jordy45 wrote: »

Hi
I'm new to the forum and this query will have been done to death I'm sure.
Our mortgage endowment pays out in November and will leave us with a £9k shortfall to pay the full mortgage off in March (rest is repayment).
2 questions
a) What would you do with the endowment money before March to get a bit of interest - or is Premium Bonds the best option?
b) The £9K shortfall - best way to deal with this with the Building Soc?

Thanks for any help


Ian

a) Put it in something like Marcus. 1.5%. Statistically PB's not a good deal as you'll miss out on the start and end months reducing the dismal interest rate to sub dismal.

b) The first best way, work out perhaps 10+ years ago after the endless stream of warning letters with red print warning of shortfall, that £10-£15k would be needed in ten years time and save enough/ overpay the IO portion to make up the difference.
Second best way, assuming you cannot borrow the Tardis, settle it from your savings.
Third best way, ask them to add it to your repayment mortgage.

Jordy45

ok thanks for the advice (incl retro!!)

silvercar

Does your repayment part of the mortgage also end in March?

If the mortgage rate you are paying is higher than any savings rate you can get, you are better off using the maturing endowment to reduce your mortgage outstanding balance. That way you can (at least) make the same mortgage payments you are making at the moment as capital reductions on the mortgage.

Example: say your mortgage rate is 3%. Your endowment mortgage is 46k, so your interest only payments on that are £115 a month. Your endowment payments could be £40 a month. So you could pay £155 a month off your balance painlessly. 5 months til March gives you £775 off the shortfall. Still a way to go, but every little helps.

dunstonh

b) The £9K shortfall - best way to deal with this with the Building Soc?

Shortfalls started to be reported around 18 years ago. The building society would expect you to have already done something to mitigate the shortfall. What have you done so far to mitigate that shortfall?

If you have sufficient affordability, most lenders will allow upto 5 years extension to the mortgage with the shortfall converted to repayment basis.