Endowement Mortgages - Make your mind up soon! (General Comments in general)

Member Name: jewels

Product:	General Comments in general
Date:	19/07/01 (526 review reads)
Rating:

Advantages: A means of saving, Premiums are in line with life cover, Money in your pocket at maturity

Disadvantages: Probably not pay your mortgage, Wasted ££'s in mortgage interest, The down side is not used as a selling point.

After the recent publicity there has been regarding Endowment Policies linked to Mortgages, I decided to look further into the matter, although us holders of this type of policy were told not to panic. I kept thinking that I did not want to still have a mortgage during my retirement years and the information I had been fed was not conclusive.

I know we can not forsee the future, but the majority of people with an Endowement Policy expected to have their Mortgage cleared at the end of the term.

I had received a couple of letters from my Insurance company which is Legal and General Assurance, informing me there may be a shortfall at the end of the policy term. It gave you average growth rates of 4, 6 and 8%. On their figures, the worst scenario I could expect would be an £18,600 shortfall at a 4% growth rate,(not pennies you must admit).

Having researched the matter further, I found that Endowements were growing at a lower rate that 4% thus meaning the figure could be much higher.

I contacted Legal and General and asked for a personal forecast at the "true" current growth rate. What I recieved was just a copy of the rates I already had, plus the surrender value of my policy. It did not enlighten me to the final projected shortfall figure.

Of course I complained, but was told that they only had to give figures in line with ligislation from the F.S.A.

The final correspondence I received, for the first time, said that it was advisable to take measures to counteract any shortfall there might be, (of course, one of their savings plans).

I decided it was now time to change my Endowement Morgage to a Repayment, after all, was it worth throwing any more money away in interest only.

I contacted my Mortgage lender, (Nat West Home Loans). They were very helpful and advised me my Mortgage can be changed to Repayment without cost to me.

Of course the monthly payments went up. It wor
ked out to approximately a 37% rise, but the mortgage term was only 17 years instead of 25 years. This meant that our mortgage would still be paid off on schedule. We were also able to keep our fixed rate which is lower than the current variable rate. At least we would have peace of mind.

I considered cashing in my Endowement and offsetting the surrender value against my Mortgage to reduce the payments. After phoning round for Life Insurance to cover the Mortgage value, I found that the premiums would be almost as much as the Endowement Premiums with no remuneration at completion. The best option was to continue with the Endowement as a means of Life Cover and savings. At least this way I would get the termination value of the Policy and instead of paying it towards the mortgage it would be mine.

Of course, finding the extra money is a pain, but at least I will not have a morgage when I'm 70, (if I make it). I do think, that instead of these Insurance Companies telling folk, "not to worry", they should be more straightforward and honest as to what people can expect at the end of their mortgage term.

Without the correct information how can people be expected to consider their options.

Remember "Mis-sold a Pension"!!

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