Shortfall on endowment - what do

[Largechris]

I have 1 more year on a 25 year £43,000 endowment mortgage. It will be about £2,000 short. This was my original property but the mortgage was converted to buy to let many years ago, always had tenants no bother. Property value is £190,000.

However I did also remortgage a few years ago to release equity as there used to be a tax break on buy to let interest payments. This portion (£32,000) was interest only.

So I will actually owe a total of £75,000, my total endowment policy will be worth £41,000, so to pay off the mortgage I will need to find about £34,000 in 12 months time.

The rent comfortably covers the mortgage payments.

I probably can get together the £34,000, but I kind of would rather not spend all that cash when interest rates are so low. I'm nowhere near retirement so I'm thinking some sort of five or ten year extension and converting to repayment?

For the (relatively) small sums involved, would the remortgage fees be daft? I don't want to spend £2,000 arrangement fees etc. on top of the £34,000 owed.

I'm not particularly wanting to sell the property, decent building and area, long term tenants etc.

What to do? Cheers,

Edited by Largechris on Friday 28th January 15:31

[Carbon Sasquatch]

Can you pay the 2k shortfall & just extend the mortgage you currently have ?

That's where I'd start - ask your existing lender what they can offer you.

[Eric Mc]

£2,000 is not much in the big scheme of things. I'd just pay the additional £2,000 required to clear at the end.

[Pit Pony]

Were you hoping the endowment would pay the remortgage as well?

[Largechris]

Pit Pony said:

Were you hoping the endowment would pay the remortgage as well?

Not really no, I knew it was a terrible investment years ago so didn’t want to put more into the endowment.

I figured something would turn up in terms of being able to pay the remaining 35K.

If I speak to my lender and say “can you change me to a repayment mortgage and extend it by ten years” am I going to have to pay fees for that?

[tighnamara]

Eric Mc said:

£2,000 is not much in the big scheme of things. I'd just pay the additional £2,000 required to clear at the end.

I think there is also £32,000 interest only so total would be £34,000

Unless I have misunderstood the post.

[Carbon Sasquatch]

tighnamara said:

I think there is also £32,000 interest only so total would be £34,000

Unless I have misunderstood the post.

But the existing lender is in for 32 - so asking them to flip to another mortgage will likely be straightforward - but asking them to increase to 34 will likely come with disproportionate fees/pain

[samdy]

If have you tenants and you're planning on holding on to it long term, then it'll be trivial to re-mortgage it onto a new interest-only B2L mortgage.

Yes there'll likely be arrangement fees but surely that's peanuts in the long run vs the opportunity cost of having to find cash to pay the mortgage off now.

[tighnamara]

Carbon Sasquatch said:

tighnamara said:

I think there is also £32,000 interest only so total would be £34,000

Unless I have misunderstood the post.

But the existing lender is in for 32 - so asking them to flip to another mortgage will likely be straightforward - but asking them to increase to 34 will likely come with disproportionate fees/pain

Ah ok, seems straightforward if that is the case.

[Largechris]

tighnamara said:

Eric Mc said:

£2,000 is not much in the big scheme of things. I'd just pay the additional £2,000 required to clear at the end.

I think there is also £32,000 interest only so total would be £34,000

Unless I have misunderstood the post.

Yes it’s likely £34,000 in cash I need to come up with to pay off the whole thing, that’s my total shortfall.

[Eric Mc]

Is it too late to switch to a repayment mortgage?

[Largechris]

Eric Mc said:

Is it too late to switch to a repayment mortgage?

Well there’s only a year left so too late to get it done in a year yes

[Eric Mc]

Pity.

I switched with about ten years to go which is what saved my bacon.

[TTmonkey]

Is this conversation from 1998… ?

Seems weird to me to be talking about endowment shortfalls at the actual tail end.

Did you make any effort to over pay?

Did you stick with the same mortgage provider this last 24 years?

Remortgage, pay off the small extra bit.

[98elise]

Remortgage.

Fee's will be negligible. Any mortgage company fees can be rolled I to the mortgage, and not all mortgage brokers charge you for their time (they get a fee from the mortgage company anyway)

I know a good broker who doesn't charge you fees, so if nothing else you can discuss your options with him at no cost to you. I've known him for 40+ years and he's done loads of mortgages for me (both BTL and residential)

PM me if you want his details. I can't post them here as it would be advertising.

[Largechris]

98elise said:

Remortgage.

Fee's will be negligible. Any mortgage company fees can be rolled I to the mortgage, and not all mortgage brokers charge you for their time (they get a fee from the mortgage company anyway)

I know a good broker who doesn't charge you fees, so if nothing else you can discuss your options with him at no cost to you. I've known him for 40+ years and he's done loads of mortgages for me (both BTL and residential)

PM me if you want his details. I can't post them here as it would be advertising.

That’s helpful thanks I will PM you