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    • flopsy1973
    • By flopsy1973 18th Jan 18, 8:06 PM
    • 196Posts
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    flopsy1973
    mortgage and endowment help
    • #1
    • 18th Jan 18, 8:06 PM
    mortgage and endowment help 18th Jan 18 at 8:06 PM
    Hi
    our fixed rate is up next month, we are looking now at taking it elsewhere, what are most people tending to go for fixed and for how long. We have a house worth 160k with a balance of 77K left on the mortgage. When the mortgage was taken out originally a endownment was taken out as it was a interest only mortgage, it is now a repayment mortgage.
    The endownment has a surrender value of 26K with prudential and 7 years left to run with payments of 112 a month.
    Is the best option to use this endownment now to bring down the balance of the mortgage and if so how ?. We were told by Prudential we would have to get a solicitor if we were to sell it on, is this the best option.
    Also would a open plan type mortgage be suitable as my partner does tend to keep quite a high current account balance of between 10-20K at times
    Sorry for all the questions thanks for your help
Page 1
    • YHM
    • By YHM 18th Jan 18, 8:33 PM
    • 537 Posts
    • 198 Thanks
    YHM
    • #2
    • 18th Jan 18, 8:33 PM
    • #2
    • 18th Jan 18, 8:33 PM
    If you encash the endowment now, you won't realise the full maturity value. If you don't need to encash it, then don't.

    Open plan as in offset? Its an option for you.

    Invest in a good broker and they will do the work for you
    I am a Mortgage Broker.

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice
    • dunstonh
    • By dunstonh 18th Jan 18, 9:24 PM
    • 92,999 Posts
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    dunstonh
    • #3
    • 18th Jan 18, 9:24 PM
    • #3
    • 18th Jan 18, 9:24 PM
    We were told by Prudential we would have to get a solicitor if we were to sell it on, is this the best option.
    is it a Pru original endowment or a Scottish Amicable? Most Pru originals are close to target. Although it can depend on the target growth rates used.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • flopsy1973
    • By flopsy1973 19th Jan 18, 9:24 AM
    • 196 Posts
    • 17 Thanks
    flopsy1973
    • #4
    • 19th Jan 18, 9:24 AM
    • #4
    • 19th Jan 18, 9:24 AM
    Hi
    thanks for that is it not better to surrender or sell it on now and use that to reduce the mortgage than waiting for the maturity date. It has not done that well 112 a month since 2000 with value of 26K ?????


    I will find out if the endowment has something to do with Scottish amicable


    we have spoken to London and country but they were not much help regarding the endowment


    Also is it better to go for long fix are we really going to see a splurge in interest rates in the next few years???
    • TrickyDicky101
    • By TrickyDicky101 19th Jan 18, 9:52 AM
    • 3,031 Posts
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    TrickyDicky101
    • #5
    • 19th Jan 18, 9:52 AM
    • #5
    • 19th Jan 18, 9:52 AM
    Hi
    thanks for that is it not better to surrender or sell it on now and use that to reduce the mortgage than waiting for the maturity date. It has not done that well 112 a month since 2000 with value of 26K ?????
    Originally posted by flopsy1973
    It is a poor compound annualised return (of approx 0.8% pa) however, it does depend on what type of endowment you have and on what basis the insurer has quoted the surrender value.

    It *probably* has significant exposure to equity markets so it is possible that a lowish quoted figure is simply down to timing [when the valuation was determined].

    As is ever the case with investments, prior performance cannot be relied upon to be an indicator of future performance.
    • dunstonh
    • By dunstonh 19th Jan 18, 10:19 AM
    • 92,999 Posts
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    dunstonh
    • #6
    • 19th Jan 18, 10:19 AM
    • #6
    • 19th Jan 18, 10:19 AM
    we have spoken to London and country but they were not much help regarding the endowment
    They are not advisers. So, they are not allowed to go into areas outside of their remit. It would be a regulatory breach if they did. So, its not that they are being unhelpful. It's just a limitation of their service.
    It has not done that well 112 a month since 2000 with value of 26K ?????
    Remember that they dont tend to show a profit for the first 10 years. Charges are front loaded. The back end is where they make the most. This is not to say it will hit target. We dont know the target growth rate yours was set up with.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • flopsy1973
    • By flopsy1973 22nd Jan 18, 9:12 PM
    • 196 Posts
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    flopsy1973
    • #7
    • 22nd Jan 18, 9:12 PM
    • #7
    • 22nd Jan 18, 9:12 PM
    so in theory it will have paid most of it's fees by now yet the 2016 and 17 statement warns of a amber warning of it not meeting the 48k target amount in 7 years time.
    We have been told that due to her income she may not possibly be able to get a mortgage and possibly will only get a mortgage offer with her current provider Halifax. They said possibly other lenders will consider her if she uses the endownment but what is the best way to do this.
    It is the advice regarding the endownment we are really struggling with
    ???
    • dunstonh
    • By dunstonh 22nd Jan 18, 9:32 PM
    • 92,999 Posts
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    dunstonh
    • #8
    • 22nd Jan 18, 9:32 PM
    • #8
    • 22nd Jan 18, 9:32 PM
    yet the 2016 and 17 statement warns of a amber warning of it not meeting the 48k target amount in 7 years time.
    projection rates nowadays are actually quite low. Lower than the long term average returns. To be only on an amber warning means it is not far off.
    It is the advice regarding the endownment we are really struggling with
    If you went to a local advice firm that does full service then you would not have a problem. They could analyse it and give advice.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • flopsy1973
    • By flopsy1973 30th Jan 18, 9:17 PM
    • 196 Posts
    • 17 Thanks
    flopsy1973
    • #9
    • 30th Jan 18, 9:17 PM
    • #9
    • 30th Jan 18, 9:17 PM
    Update
    Spoken to another adviser who was heavily hinting to get rid of the endownment to put towards mortgage but could not give specific advice.
    Spoke to financial adviser but they said the fees involved to give advice would not make it worthwhile so we are still bit stuck

    the difference between repayments between the full 78k or 52k if we use the endownment now is around 164. We pay 120 into the endownment monthly, so surely it is not worth keeping until the end of term in 7 yrs time???? The target amount is 48k
    surrendering the policy is the only option or can they still be sold ??
    Thanks
    • flopsy1973
    • By flopsy1973 3rd Feb 18, 10:40 AM
    • 196 Posts
    • 17 Thanks
    flopsy1973
    any advice on this would be appreciated from what iv read endowments are not worth sticking with ???
    • sammyjammy
    • By sammyjammy 3rd Feb 18, 11:00 AM
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    sammyjammy
    You seem to have had plenty of free advice which you aren't listening to.....
    "You've been reading SOS when it's just your clock reading 5:05 "
    • Thrugelmir
    • By Thrugelmir 3rd Feb 18, 11:50 AM
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    Thrugelmir
    What's the projected maturity value of the policy?
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • silvercar
    • By silvercar 3rd Feb 18, 1:04 PM
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    silvercar
    Check you are comparing like with like.

    The sell option means selling the endowment, putting all the proceeds to reduce the mortgage balance. Taking out life insurance to cover what you had in the endowment. Then looking at your current repayments, adding on the amount you currently pay towards the endowment, less the new life insurance cost, seeing how that compares with keeping the endowment and what it would need to achieve in order to match the sell option. See if that looks reasonable.

    So currently a 77k mortgage with 112 in endowment payment a month.

    Surrender at 26k, leaves you with 51k mortgage and no endowments. If you continue paying the mortgage as if it was 77k and shove an extra 112 (less whatever life insurance for 77k is) , how soon would you clear it / what balance would be owed after 7 years?

    Compare that with an estimate of what the endowment will produce at term.
    • flopsy1973
    • By flopsy1973 5th Feb 18, 9:37 PM
    • 196 Posts
    • 17 Thanks
    flopsy1973
    What's the projected maturity value of the policy?
    Originally posted by Thrugelmir
    The projected amount is 43,000 with Prudentials view that 4.5% each year is assumption for future growth.
    • dunstonh
    • By dunstonh 5th Feb 18, 10:02 PM
    • 92,999 Posts
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    dunstonh
    The projected amount is 43,000 with Prudentials view that 4.5% each year is assumption for future growth.
    Originally posted by flopsy1973
    It is not Prudential view that they use 4.5%. The regulator controls the assumed growth rates.

    A fund growing consistently at 4% p.a. may use 4.5% just as a fund with 10% p.a. will do.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • flopsy1973
    • By flopsy1973 5th Feb 18, 10:04 PM
    • 196 Posts
    • 17 Thanks
    flopsy1973
    Check you are comparing like with like.

    The sell option means selling the endowment, putting all the proceeds to reduce the mortgage balance. Taking out life insurance to cover what you had in the endowment. Then looking at your current repayments, adding on the amount you currently pay towards the endowment, less the new life insurance cost, seeing how that compares with keeping the endowment and what it would need to achieve in order to match the sell option. See if that looks reasonable.

    So currently a 77k mortgage with 112 in endowment payment a month.

    Surrender at 26k, leaves you with 51k mortgage and no endowments. If you continue paying the mortgage as if it was 77k and shove an extra 112 (less whatever life insurance for 77k is) , how soon would you clear it / what balance would be owed after 7 years?

    Compare that with an estimate of what the endowment will produce at term.
    Originally posted by silvercar

    Right i hope i'v worked this out correctly??? if we pay 638 a month which includes the extra 112 a month from the endownment then after 7 years there would be a balance 0f 55,504 left.
    The estimate for the endownment in above post is 43K

    I have not included insurance in this estimate as we need to review this also as we have 2 separate policies at the moment which need to be reviewed
    thanks
    • flopsy1973
    • By flopsy1973 6th Feb 18, 9:41 PM
    • 196 Posts
    • 17 Thanks
    flopsy1973
    any thoughts with this
    • silvercar
    • By silvercar 6th Feb 18, 10:27 PM
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    silvercar
    If you pay the endowment proceeds 26k now off the mortgage and keep the repayments at about 638 that you are paying now, in 7 years you will have cleared the mortgage (roughly speaking, depending on interest rates etc). So that would be a certainty.

    The other option is to keep going with the endowment and take the new mortgage over a longer term (to allow for a lower monthly repayment) and hope that the combination of having a repayment mortgage and a maturing endowment gives you cash at the end.

    Combine either of those options with an offset mortgage so you gain on any short term savings you have for further gains.

    I can't predict what the endowment will pay out at, crystal ball territory. People seem to think the 4.5% assumption is low, so you could estimate higher - which means more than the 43k you are talking of.
    • flopsy1973
    • By flopsy1973 7th Feb 18, 11:04 AM
    • 196 Posts
    • 17 Thanks
    flopsy1973
    If you pay the endowment proceeds 26k now off the mortgage and keep the repayments at about 638 that you are paying now, in 7 years you will have cleared the mortgage (roughly speaking, depending on interest rates etc). So that would be a certainty.

    The other option is to keep going with the endowment and take the new mortgage over a longer term (to allow for a lower monthly repayment) and hope that the combination of having a repayment mortgage and a maturing endowment gives you cash at the end.

    Combine either of those options with an offset mortgage so you gain on any short term savings you have for further gains.

    I can't predict what the endowment will pay out at, crystal ball territory. People seem to think the 4.5% assumption is low, so you could estimate higher - which means more than the 43k you are talking of.
    Originally posted by silvercar

    She can pay more now so surely it better to pay more to get the mortgage finished with rather than paying less for longer??? and the chances of that endownment giving us any surplus is not known.
    We do have short term savings so we could make further savings here????
    • silvercar
    • By silvercar 7th Feb 18, 4:39 PM
    • 37,305 Posts
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    silvercar
    She can pay more now so surely it better to pay more to get the mortgage finished with rather than paying less for longer??? and the chances of that endownment giving us any surplus is not known.
    We do have short term savings so we could make further savings here????
    Originally posted by flopsy1973
    Personal choices based on attitude to risk.
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