Endowment mortgage shortfall

scoobysue61

My mortgage is due to finish in July.   I have been informed there will be a shortfall ( which I have accounted for) but was wondering now with the situation on coronavirus is the shortfall liable to escalate resulting in me owing a lot more than originally expected.  Many thanks for any help.

[Deleted User]

The only variable is the ultimate performance of your endowment.  You can monitor its performance but there's little you can do about it at this stage.

As July gets closer, the final result and will resultant shortfall will become clearer.

silvercar

Moving this to the mortgage board, I'm sure that people on there will be able to help with endowment questions.
My gut reaction is that endowments have scheduled end dates and the funds are moved out of heavy investments towards cash as they near the end of their term. So you won't be directly effected by the current downfall to the extent that the value of the stock market on the day that your endowment ends will determine your payout, though the general trend will have an impact.

dunstonh

Markets fell between 24th Feb and 19th March. Since then they have been zig zagging back up again but some way short of the peak earlier in February. Different areas are affected in different ways. Some are not down by very much, some by more than 25%.

In the scheme of things, this drop is large but it is only ranked 3rd in the last 20 years.  

The value of your investment has almost certainly dropped. The degree will depend on how it is invested and what processes are in place to reduce risk as you get closer to maturity (usually a manual process and not automatic).   We are generally seeing cautious investors back to a position they were 8 months ago.  low/medium investors are back to around a year ago.  Medium risk not far behind that.  Ironically, higher risk investors have not suffered as much during this period as areas of higher risk didnt fall as much.   However, it all comes down to the individual investments held and everyone will be different.

silvercar

If you think things will improve, I wonder if it is possible to make the endowment policy paid up but still invested for an extra 3 months. By law you are entitled to ask your lender for a 3 months mortgage holiday, so you could delay your mortgage end date by 3 months, though you would still owe the interest.

dunstonh

paid up plans still have to mature on the end date (term cannot be adjusted without changing the qualifying status of the plan - which could result in extra tax).  However, the money can be invested into a modern alternative if it is not required in the short term.

scoobysue61

Thank you for all your help.  It is much appreciated.

Thrugelmir

silvercar said:

By law you are entitled to ask your lender for a 3 months mortgage holiday, so you could delay your mortgage end date by 3 months, though you would still owe the interest.

The right to apply for a payment holiday will not overwrite the contractual terms of the mortgage, i.e. the final redemption date. 

silvercar

Thrugelmir said:

silvercar said:

By law you are entitled to ask your lender for a 3 months mortgage holiday, so you could delay your mortgage end date by 3 months, though you would still owe the interest.

The right to apply for a payment holiday will not overwrite the contractual terms of the mortgage, i.e. the final redemption date. 

Some lenders, including Barclays, are defaulting to extending the term of the mortgage rather than increasing future payments.