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Repayment mortgage using endowments for deposit...



 
 
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  #1  
Old April 25th 09, 09:19 PM posted to uk.finance
PCPaul
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Posts: 29
Default Repayment mortgage using endowments for deposit...

Is there a mortgage product on the market that would allow me to use my
existing (unencumbered) endowments in some way as part/full deposit, then
have a repayment mortgage for the rest of it?

Currently the endowments are subject to a 'Market Value Reduction' which
knocks a fair bit off their surrender value, but presumably the financial
world is expecting markets to recover at some point in the next 25 years
so they should then be worth their currently projected final value..

Or do I have no choice but to cash them in and use the cash as a smaller
deposit? I have no other substantial capital I could use instead.






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  #2  
Old April 26th 09, 05:46 AM posted to uk.finance
Tom E
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Posts: 61
Default Repayment mortgage using endowments for deposit...


"PCPaul" wrote in message
m...
Is there a mortgage product on the market that would allow me to use my
existing (unencumbered) endowments in some way as part/full deposit, then
have a repayment mortgage for the rest of it?

Currently the endowments are subject to a 'Market Value Reduction' which
knocks a fair bit off their surrender value, but presumably the financial
world is expecting markets to recover at some point in the next 25 years
so they should then be worth their currently projected final value..


hmmmmm, you missed a 0 off.





Or do I have no choice but to cash them in and use the cash as a smaller
deposit? I have no other substantial capital I could use instead.









  #3  
Old April 26th 09, 07:01 AM posted to uk.finance
robgraham
external usenet poster
 
Posts: 159
Default Repayment mortgage using endowments for deposit...


"PCPaul" wrote in message
m...
Is there a mortgage product on the market that would allow me to use my
existing (unencumbered) endowments in some way as part/full deposit, then
have a repayment mortgage for the rest of it?

Currently the endowments are subject to a 'Market Value Reduction' which
knocks a fair bit off their surrender value, but presumably the financial
world is expecting markets to recover at some point in the next 25 years
so they should then be worth their currently projected final value..

Or do I have no choice but to cash them in and use the cash as a smaller
deposit? I have no other substantial capital I could use instead.


You don't need a special mortgage product. Just tell the lender you want to
convert part of the mortgage to repayment. They'll then set it up for you.
It makes no difference to the rest of the mortgage terms (but just check
that there is no penalty for repaying part of the mortgage early - which is
in effect what you will be doing on a monthly basis). They may charge you an
admin fee of say 50.

Rob Graham


  #4  
Old April 26th 09, 10:22 AM posted to uk.finance
tim.....
external usenet poster
 
Posts: 690
Default Repayment mortgage using endowments for deposit...


"robgraham" wrote in message
...

"PCPaul" wrote in message
m...
Is there a mortgage product on the market that would allow me to use my
existing (unencumbered) endowments in some way as part/full deposit, then
have a repayment mortgage for the rest of it?

Currently the endowments are subject to a 'Market Value Reduction' which
knocks a fair bit off their surrender value, but presumably the financial
world is expecting markets to recover at some point in the next 25 years
so they should then be worth their currently projected final value..

Or do I have no choice but to cash them in and use the cash as a smaller
deposit? I have no other substantial capital I could use instead.


You don't need a special mortgage product. Just tell the lender you want
to convert part of the mortgage to repayment. They'll then set it up for
you. It makes no difference to the rest of the mortgage terms (but just
check that there is no penalty for repaying part of the mortgage early -
which is in effect what you will be doing on a monthly basis). They may
charge you an admin fee of say 50.


From his post I am guessing that he is looking to buy a new (to him) house
and is struggling for the minimum 10% (or more) deposit that is now required

If that is the situation then surely the answer is no, he can't use the
accrued value of his endowment as a deposit unless he enchases it (which as
he says would not be advisable).

tim




  #5  
Old April 26th 09, 10:46 AM posted to uk.finance
Ronald Raygun
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Posts: 5,228
Default Repayment mortgage using endowments for deposit...

robgraham wrote:

"PCPaul" wrote in message
m...
Is there a mortgage product on the market that would allow me to use my
existing (unencumbered) endowments in some way as part/full deposit, then
have a repayment mortgage for the rest of it?

Currently the endowments are subject to a 'Market Value Reduction' which
knocks a fair bit off their surrender value, but presumably the financial
world is expecting markets to recover at some point in the next 25 years
so they should then be worth their currently projected final value..


25 years? How long have you held these endowments for, and when are
they due to mature? I suspect you'll be lucky to see them reach
half their projected final value.

Or do I have no choice but to cash them in and use the cash as a smaller
deposit? I have no other substantial capital I could use instead.


You don't need a special mortgage product. Just tell the lender you want
to convert part of the mortgage to repayment. They'll then set it up for
you.


I think you misunderstand the OP. He refers to his existing endowments
as "unencumbered", which I take to mean they are no longer earmarked to
help repay any existing mortgage loan. Presumably they once were, but he
has sold the house yet decided to keep the endowments going, and is not
at present a homeowner. He may be renting or living with parents or on
a boat or in a tent, but is now considering buying a house again.

Whilst it may be true that he won't need a "special mortgage product",
and that he can simply use the existing endowments to pay off part
of the new loan when they mature, and thus the size of the repayment
portion can be calculated accordingly, his problem is that he would still
not have a deposit. He would need to borrow the full purchase price, and
although he might need to secure only (say) 75% of the loan against the
property itself, and the remaining 25% could be secured against the
endowments, I expect that in practice 100% would be secured on the
property, and so it would be treated as a high risk 100% loan, of which
probably none are available just now.

I think he would be seen as lower risk if he sold the endowments (is there
still a reasonable market in traded endowments, so that he would get a
better deal than surrendering them?) and used the proceeds as a 20% deposit.

  #6  
Old April 26th 09, 11:17 AM posted to uk.finance
tim.....
external usenet poster
 
Posts: 690
Default Repayment mortgage using endowments for deposit...


"Ronald Raygun" wrote in message
m...
robgraham wrote:

"PCPaul" wrote in message
m...
Is there a mortgage product on the market that would allow me to use my
existing (unencumbered) endowments in some way as part/full deposit,
then
have a repayment mortgage for the rest of it?

Currently the endowments are subject to a 'Market Value Reduction' which
knocks a fair bit off their surrender value, but presumably the
financial
world is expecting markets to recover at some point in the next 25 years
so they should then be worth their currently projected final value..


25 years? How long have you held these endowments for, and when are
they due to mature? I suspect you'll be lucky to see them reach
half their projected final value.



But he would receive the minimum guaranteed, which is almost certainly more
than the surrender value

tim


  #7  
Old April 26th 09, 11:18 AM posted to uk.finance
Ronald Raygun
external usenet poster
 
Posts: 5,228
Default Repayment mortgage using endowments for deposit...

tim..... wrote:

From his post I am guessing that he is looking to buy a new (to him) house
and is struggling for the minimum 10% (or more) deposit that is now
required

If that is the situation then surely the answer is no, he can't use the
accrued value of his endowment as a deposit unless he enchases it (which
as he says would not be advisable).


Actually it might not be that inadvisable to encash them. The alternative
would be to borrow against them (one way or the other) and this would mean
paying interest. Over the the remaining life of the endowments, that
interest could have a greater effect than the up-front hit of the MVR.

  #8  
Old April 26th 09, 11:57 AM posted to uk.finance
Ronald Raygun
external usenet poster
 
Posts: 5,228
Default Repayment mortgage using endowments for deposit...

tim..... wrote:

"Ronald Raygun" wrote in message
m...

25 years? How long have you held these endowments for, and when are
they due to mature? I suspect you'll be lucky to see them reach
half their projected final value.


But he would receive the minimum guaranteed, which is almost certainly
more than the surrender value


What minimum guaranteed?

AIUI it is the case with most endowments that they guarantee to pay
out the target value if the policyholder dies. But if the policy runs
to maturity, there is no guaranteed minimum. The payout depends
entirely on the value of the investments and (in the case of with
profit policies) on the performance of the provider.

  #9  
Old April 26th 09, 12:35 PM posted to uk.finance
PCPaul
external usenet poster
 
Posts: 29
Default Repayment mortgage using endowments for deposit...

On Sun, 26 Apr 2009 10:46:09 +0000, Ronald Raygun wrote:

I think you misunderstand the OP. He refers to his existing endowments
as "unencumbered", which I take to mean they are no longer earmarked to
help repay any existing mortgage loan. Presumably they once were, but
he has sold the house yet decided to keep the endowments going, and is
not at present a homeowner. He may be renting or living with parents or
on a boat or in a tent, but is now considering buying a house again.



Spot on. When I got divorced recently she got the house and remortgaged
it separately, then I got the endowments and a few other bits to balance
the books. The endowments have about 8 and 12 years (of 25 each) left to
run, and are no longer attached to a mortgage.

Sadly this all took place just before the crunch, when having the
policies rather than the cash seemed like a good idea... but now they are
just awfully bad investment plans ;-)

House prices are low now, and possibly troughing (or possibly not? Who
knows?) which makes it a reasonable time to buy (as a place to live long
term, not as an investment). However the endowments are reduced at the
moment by about 15% due to MVR as well so any benefit of house prices
being low is cancelled out by that. The gamble is, will house prices rise
before the MVR is taken off?

  #10  
Old April 26th 09, 12:46 PM posted to uk.finance
Bill Taylor
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Posts: 4
Default Repayment mortgage using endowments for deposit...

On Sun, 26 Apr 2009 11:57:37 GMT, Ronald Raygun
wrote:

tim..... wrote:

"Ronald Raygun" wrote in message
m...

25 years? How long have you held these endowments for, and when are
they due to mature? I suspect you'll be lucky to see them reach
half their projected final value.


But he would receive the minimum guaranteed, which is almost certainly
more than the surrender value


What minimum guaranteed?

AIUI it is the case with most endowments that they guarantee to pay
out the target value if the policyholder dies. But if the policy runs
to maturity, there is no guaranteed minimum. The payout depends
entirely on the value of the investments and (in the case of with
profit policies) on the performance of the provider.


If it was a with profits endowment there will be a minimum payout.
With profits generally have a basic sum assured (less than the life
insurance payout) and used to get annual bonuses. The basic sum
assured and any annual bonuses are guaranteed.
 




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