sorry if this has been asked before, but here is my problem- we took out an Endownment mortgage with the then Leeds Building Soc(now Halifax) in 1989 for 33,000. as a result of a complaint about mis selling we eventually received an offer of 11,000 comp from Land G. it is a with profits policy currently at 5000 !. The offer can be accepted on condition of surrendering the endownment. what advice do you recommend. Halifax advises accepting the offer and using the 11,000 to off set a repayment mortgage ?. I could pobably pay off the whole thing with savings if pushed. Any help/advise grealy appreciated.
A few preliminaries: You didn't take out an "endownment" but an "endowment" (only two 'n's, not three). You didn't take out an endowment mortgage with LBS/H but it would seem from what you say that you took an interest-only mortgage loan from LBS/H packaged with an endowment from L&G.
There are three separate questions here.
One is whether £11k is a reasonable estimate of what the policy ought to have been worth now instead of £5k, and there don't appear to be strong grounds to claim that it should be much more. Alternatively, had you gone for a repayment type from the outset, whether £22k is a good estimate of what the amount owing now would have been. I suspect it'd probably be a bit less, giving cause to ask for the offer to be upgraded slightly, but there won't be much in it, a couple of grand perhaps. It depends on the lender's detailed interest rate history. It also depends on when in 1989 you began. Was it 14 years ago, or more like 15?
On balance, to avoid too much hassle, try to ask for a little more but if no more is forthcoming, I'd be inclined to accept.
The second question is what you should do with the cash when you get it. Certainly paying it off, reducing your loan balace to £22k, is a good idea, and converting the loan to repayment is too.
Finally, whether you should smash your piggy bank and pay off most or all of the remaining £22k, depends on what other use you would have had for the savings, and what other use you could put your future income to, which would then no longer be required for interest, repayments and endowment premiums. You would in fact "earn" more interest from "investing" your cash in your loan than keeping it in an interest-bearing bank account. Basically, if a savings account pays you 4% interest (minus 20% tax), but the loan costs you, say, 4.5% interest, then each £100 you transfer from savings and use to pay off the loan will mean you will earn £3.20 less interest but you'll pay £4.50 less interest, so the benefit to you is £1.30, or 80p more if you're a HRTP.
A flexible option which may be worth looking into is an equivalent to the EGG saver mortgage. You will have to look at the small print and it may not be approriate but I shall give an example.
At the moment I have a repayment mortgage with EGG. I also have an amount equivalent to more than half the balance in a linked savings account. (As in the well known TV ad.) I get no interest on my savings and pay none on an equivalent amount of my mortgage. The advantage over paying off the mortgage is that if I need some money in a hurry I can for instance withdraw 5000 and pay just the interest on that 5000 at the mortgage rate (less than 1% above BofE base guaranteed) approx. 4.5% currently.
Obviously whether it is suitable depends on how your savings are currently invested and the *net* income generated.
If you do look at these types of products beware of the small print and any restrictions within. I once looked at a similarly advertised Woolwich product but he restrictions on how much capital you could set off and when made it incomparable.
Less hassle, but begs the response from L&G that it is their best offer, to see what the OP does.
It shouldn't be too difficult to calculate exactly what would have been paid off a repayment loan over the period, and use this as the argument for a higher offer, or to snatch their hands off
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