On receiving the happy news this afternoon that Neal’s endowment mortgage has a high risk of shortfall (so nice of them to finally let us know ), I took it upon myself to try and wade through the 10 or so pages of statement sent through to figure out how bad it actually is as Neal understands them even less than I do.
However, as I do not really have any idea about how endowment mortgages work, I need some confirmation from anyone who understands them as to whether I am right or completely off with my assessment. So here goes…
Mortgage amount: £33,000 borrowed from the Halifax in October 1992
Repayments: Interest only, all up to date
Endowment company: Standard Life
They have said that at a high return rate (7.5%), it will pay out £28,300, and at a low rate (4%), it will only pay out £21,700. The current value of the policy is only £6,570 and we have paid into it for 12 years, with 13 years remaining (can you believe they are only telling us this now??)
If I have it right, we will only owe the bank £33000 at the end of the time period because we have been paying off the interest as it accumulates. If we cashed it in now and had to move to a repayment mortgage, we would have £6570 to pay the bank back with, but still then owe them £26430 after the payment…is that right ? From what I can get, we would need to take out a repayment mortgage for £26430 to swap over from the endowment mortgage (not including fees they would charge). Then again I may have it all wrong as we don’t get these stupid endowments in Australia and the documentation that we got sent by Standard Life is not exactly clear.
Either way we have well and truly been sewn up by their poor investment strategy :mad: , and to make it all the more interesting we will be selling up to move back to Oz in the next couple of years anyway and will HAVE to pay it out early one way or the other.
I believe you can keep the endowment policy running even if you pay up the mortgage in full. This might be a better long term option if you think the endowment value will grow faster in the later policy years (and you can afford it).
Personally I never want anything to do with endowment or pension type funds. imo there’s only one party who makes money and it ain’t the likes of you or me. :mad:
I successfully got my endowment/insurance fund “refunded” back to me in full after going through loads of paperwork from the original sales brief. I managed to get back from my policy the money I had paid into the endowment + interest at market rate, which considering the endowment was losing me money each month was a nice bonus.
Your calculations from what I can tell are correct. I would try to resurrect the initial graphs and paperwork from the original selling of the endowment policy. Many of these were marketed in such a way to show massive bias to the endowment maturing at a higher amount than the target. If you can find these documents, then work out how much has been “invested” into the endowment fund, and what the net worth is now. With a lot of endowment policies you are actually losing money monthly :eek: 12years is about the time from memory most show as the point of making an even break.
I’m more than happy to assist in any way I can (time permitting), you will be shocked at the “shortfall”, be prepared for it
The more paperwork kept the better, then a much better chance of a case for mis-selling can be put forward to the financial complaints. A £10K shortfall is a massive shortfall on £33k, there has to be a case in there somewhere. :nod:
You presumably have already been paying the interest on the 33K so its redemption should cost just the original sum. The deal should be/was/maybe/if you’re lucky/ that the endowment rises to a value of 33K in the full term of 25 years and covers the mortgage redemption.
My parent’s got compo in some form, took it as far as being being mis-sold an endowment on bad advice? or whatever, though they did not get much back.
If it was touted in a way where the negatives were never mentioned etc etc then take it
up with the governing body.
Most are, unsure if there was a cut off though? surprised you’ve not been aware sooner
that’s really bad form on both Halifax and Standard life, which I think is the same combo
as my parents had.
what you effectively have is a £33K loan from the bank, that remains at £33K as all you are paying on this is interest.
The endoyment policy is then “engineered” to cover the loan, and provides the security (allegedly) in order for the bank to loan you the cash in the first place. These were sold with massive enthusiasm they would get you back more than the target, this is 90% of cases has not been the case, hence why a lot of people claimed mis-selling.
What you would have at the end of it all would be
Debt = £33k
Cash In Value of Endoyment = £6750
So net “debt” at the moment = £26,250
What the bank will ask you to do is put more into the endoyment policy to “top-up” and try to ensure you can pay back the £33K. Endoyments are tricky to get out of, they normally show profits mid-term, which yours is not and is poor performing, hence make a complaint.
The very fact you are asking how your policy works is in itself proof you were mis-sold. Strong case imo.
the Claim2Gain and other types of site of that sort basically fill out the FSA forms for you and take a cut, the one you found may legit, but be VERY wary.
Get Renata to read through here this is all the information you need, its how I managed to get my money back, and where a couple of others I know also got compensation amounts as well.
There used to be companies willing to buy an endowment policy for for than its surrender value. Not sure how much more though.
Better to chase up compensation from the people that sold you the policy, we did and got a fairly substantial sum added to the surrender value on ours a few years ago
Also be carefull if you do decide to get out of the endowment that you are still covered on a life policy of some sort as the endowment is most often also your life policy.
My endownment will shortfall by 6k on 74k at the mid growth figures so i adjusted my main mortgage when i remortgaged to be part repayment and part endowment with seperate life and critical illness cover (which doesn’t cost that much more btw)
Also, has been said, the policy may be a sellable item, rather than just surrendering it.
), I took it upon myself to try and wade through the 10 or so pages of statement sent through to figure out how bad it actually is as Neal understands them even less than I do.
? From what I can get, we would need to take out a repayment mortgage for £26430 to swap over from the endowment mortgage (not including fees they would charge). Then again I may have it all wrong as we don’t get these stupid endowments in Australia and the documentation that we got sent by Standard Life is not exactly clear.