Cashing in endowment?

silvertoes

Hi can anyone help a friend of mine

She has an endowment mortgage that is hopeless, and would like to cash it in. Her problem is that she is on income support and gets help with the costs of the interest part of the mortgage. Would she be able to cash this in or will she have problems with the mortgage lender?

Thanks for any help!

dunstonh

The lender is unlikely to care at this stage. They are only interested getting the money back at the end of the term. Providing she has means for that, there will be no problem. She could still switch to repayment and get support on the interest only element as nothing has changed there. It should cost about the same as she is paying now.

The only possible snag is that benefits people may consider surrender of the endowment as a savings lump sum if it isnt used to pay off a chunk of the mortgage. This may reduce some benefits (depending on what she gets).

As it happens, by switching to a repayment mortgage, the amount of interest charged will reduce over time and this will reduce her benefit. It may be more beneficial for her to get the endowment reviewed and see if it is worth keeping. It could be that a range of funds are available and its just a bad one that she is currently in. Or it could be a unit linked one already which is just below target because of the stockmarket crash (any projection is going to show a shortfall after a stockmarket crash if its invested in the stockmarket). The years following the crash have the potential to close that gap if invested in the right place.

Lots of "ifs" there and a bit more to look into perhaps than initially thought.

MINMOUSE

Another thing to check with is to see whether or not the policy is assigned to the lender. If it is she would need to contact them to re-assign it back to her which they may or may not do depending on what other investments or/and life cover she holds.