Ask the experts
About our experts...
At John Charcol, we are constantly asked for advice by borrowers on what they should do when it comes to mortgages. As such, we created this section so that you can submit your questions to our experts. The answers are provided by a number of people who have years of experience in the mortgage market. The team is led by Peter Woodward who spent his formative years as an underwriter with one of the major UK lenders and the last 10 years in our Technical Department along side Ray.
So please do submit your question and we will do all we can to answer it as quickly as possible
Please be aware that these answers can only be generic and no personal recommendations can be made.
Posted on 07/02/2009
My low cost endowment policy will be maturing in March which amounts to around £16,500. This endowment is not tied to my mortgage. Do I use this money to pay off the mortgage which is around £23,000 or put it somewhere where it will gain interest?
Thanks I
Assuming your mortgage has no early repayment charges the things to consider are:
• If you have any other borrowings in addition to the mortgage the interest rate is likely to be higher than the mortgage rate (except on a credit card balance transfer rate) and so it would be better to use the funds to pay off this more expensive debt.
• Might you need all or any of the endowment proceeds in the foreseeable future? If so it may be worth putting the amount required in a good savings account (£3,500 could go in a tax free ISA in March and another £3,500 after 5 April) as borrowing new funds in the current environment may be difficult and / or expensive.
• If you don’t anticipate a need for the funds you should compare the best available rate after tax if you save the money with your mortgage rate. Unless the net savings rate is higher than the mortgage rates you should use the funds to reduce the mortgage. This will reduce your interest payments substantially and if you then maintain your monthly payments at the current level you would repay the balance of the mortgage more quickly.
Categories: Endowments
Posted on 07/03/2008
Our current fixed rate will be ending in June. We have two endowment policies which are no longer linked to our mortgage and were wondering whether it would be advisable to surrender them (they're currently worth around £36000) and offset them against our mortgage (current outstanding balance - £70,000). We would like to try to pay off our mortgage quickly in order to put us back in the position that we would have been if our endowment had performed as we were advised - ie pay off the mortgage and leave us with a lump sum.
Any advice would be gratefully received!
Ann
Categories: Endowments
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not neccessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.