Endowment mortgage/selling house query

fairylights100

Hi, I wonder if someone could give me some advice please. We have an endowment mortgage due to end in 3 years. We are considering selling our home before it ends as we’re worried the endowment won’t cover it. Not sure what figures are helpful, but these are some approximate details:

Mortgage £90k
Endowment projection value £60k (Prudential - amber warning)
Current house value £300k

Am I right in saying that if we use the proceeds of the sale to pay off the mortgage we’d still have a majority of the sale figure to rent temporarily/use as a deposit for another purchase? Would we also still have the endowment if we cashed it in for additional funds, or let it run it’s term and keep as an investment? Everything is paid up to date and there is no arrears. I appreciate there may be some additional fees incurred, but just wonder what our best financial options are?

We don’t have a financial adviser and have let this drift a bit, and I’d appreciate some opinions before speaking to an adviser as I have a bit of a mistrust of them (we weren’t well informed about endowment mortgages when we took it out) and I’m not very good at understanding financial things.

Thank you in advance and apologies if the questions are stupid.

Exodi

Is the capital sum owed at the end of the mortgage 90k? What about what you have left to pay in interest? It looks pretty clear your endowment won't cover the amount so you will have to sell.

AnotherJoe

Have you considered getting a new mortgage of £30k to pay off the remainder?
Also, if you look at costs of selling, buying, stamp duty, refurbishment etc it might easily be £10k and if you dont need to move, why waste that money?
And yes, you could also keep the endowment running, buy a house for say £200k with the £210k in the current house, and in 3 years have £60k cash.

AnotherJoe

Exodi wrote: »

Is the capital sum owed at the end of the mortgage 90k? What about what you have left to pay in interest? It looks pretty clear your endowment won't cover the amount so you will have to sell.

They will not "have" to sell if they can cover the £30k from elsewhere, such as another mortgage. Also, depending upon the type of endowment there may be a bonus and the sum received more than the £60k.

Thrugelmir

Have you spoken to your current lender about extending the mortgage term?

Can you afford to over pay the mortgage now?


Start taking action now rather than later. Time will soon pass.

Exodi

AnotherJoe wrote: »

They will not "have" to sell if they can cover the £30k from elsewhere, such as another mortgage. Also, depending upon the type of endowment there may be a bonus and the sum received more than the £60k.

Actually, of course you're right. Not quite sure why I said they'd have to sell now :rotfl::rotfl:

I blame the excitement of the bank holiday weekend personally!

Socajam

I agree with AnotherJoe : take out a mortgage for the £30k.
What I did with my endowment when I realized there was going to be a shortfall was to change my mortgage to a repayment, overpaid on the mortgage and continue to pay the endowment.
When the endowment ended, I walked away with over £50k
Best decision I ever made.

fairylights100

Thank you for advice. I didn’t realise some endowments have a bonus so I will need to look into it. We are quite happy to move, but seems we do have other options so I will explore extending the mortgage first I think and take it from there. We’re in our mid 40s though so not sure if that will affect our options in terms if taking out another mortgage.

Is it best to speak to a financial adviser as I’m also not sure when is the best time to do all of this. If we sell, should we do it now or much nearer to the end of the mortgage?

Thanks again

Thrugelmir

fairylights100 wrote: »

We’re in our mid 40s though so not sure if that will affect our options in terms if taking out another mortgage.

Repaying £30k before you retire doesn't appear to be an issue. Subject to you meeting your lenders criteria.

Ms_Chocaholic

Can you cut back on your spending and overpay the mortgage now and hopefully with a bonus and your overpayments you will bring the amount owed down.

amnblog

Sounds like you would benefit from some Professional advice.

In the meantime.

You say the mortgage ends in 3 years and unless you have made any changes the endowment will also end at the same time. If you have an endowment with three years to run, pay it right up until it ends (maturity) for maximum benefit. You can think of it a savings plan. You can use it to pay off some of your mortgage but you do not have to.

If you sell now in order to move you will bank £210,000 less sales costs.

If that is sufficient deposit for your next home the endowment does not need to be touched.

You will have one of two types of endowment.

With profits - if this type there will be a relatively large bonus added when the plan matures. This is known as a terminal bonus. Worth waiting for.

Unit linked - if this type the value will vary day to day as the values of the underlying investments move. In this case it is worth paying attention to make sure you do not cash it in when unit values are particularly low. For example in a recession.

If you look at the paperwork if will mention With Profits or Unit Linked which lets you know which you have.