Is there a mortgage product on the market that would allow me to use my existing (unencumbered) endowments in some way as part/full deposit, then have a repayment mortgage for the rest of it?
Currently the endowments are subject to a 'Market Value Reduction' which knocks a fair bit off their surrender value, but presumably the financial world is expecting markets to recover at some point in the next 25 years so they should then be worth their currently projected final value.. Or do I have no choice but to cash them in and use the cash as a smaller deposit? I have no other substantial capital I could use instead.
You don't need a special mortgage product. Just tell the lender you want to convert part of the mortgage to repayment. They'll then set it up for you. It makes no difference to the rest of the mortgage terms (but just check that there is no penalty for repaying part of the mortgage early - which is in effect what you will be doing on a monthly basis). They may charge you an admin fee of say 50.
From his post I am guessing that he is looking to buy a new (to him) house and is struggling for the minimum 10% (or more) deposit that is now required
If that is the situation then surely the answer is no, he can't use the accrued value of his endowment as a deposit unless he enchases it (which as he says would not be advisable).
25 years? How long have you held these endowments for, and when are they due to mature? I suspect you'll be lucky to see them reach half their projected final value.
I think you misunderstand the OP. He refers to his existing endowments as "unencumbered", which I take to mean they are no longer earmarked to help repay any existing mortgage loan. Presumably they once were, but he has sold the house yet decided to keep the endowments going, and is not at present a homeowner. He may be renting or living with parents or on a boat or in a tent, but is now considering buying a house again.
Whilst it may be true that he won't need a "special mortgage product", and that he can simply use the existing endowments to pay off part of the new loan when they mature, and thus the size of the repayment portion can be calculated accordingly, his problem is that he would still not have a deposit. He would need to borrow the full purchase price, and although he might need to secure only (say) 75% of the loan against the property itself, and the remaining 25% could be secured against the endowments, I expect that in practice 100% would be secured on the property, and so it would be treated as a high risk 100% loan, of which probably none are available just now.
I think he would be seen as lower risk if he sold the endowments (is there still a reasonable market in traded endowments, so that he would get a better deal than surrendering them?) and used the proceeds as a 20% deposit.
Actually it might not be that inadvisable to encash them. The alternative would be to borrow against them (one way or the other) and this would mean paying interest. Over the the remaining life of the endowments, that interest could have a greater effect than the up-front hit of the MVR.
AIUI it is the case with most endowments that they guarantee to pay out the target value if the policyholder dies. But if the policy runs to maturity, there is no guaranteed minimum. The payout depends entirely on the value of the investments and (in the case of with profit policies) on the performance of the provider.
Spot on. When I got divorced recently she got the house and remortgaged it separately, then I got the endowments and a few other bits to balance the books. The endowments have about 8 and 12 years (of 25 each) left to run, and are no longer attached to a mortgage.
Sadly this all took place just before the crunch, when having the policies rather than the cash seemed like a good idea... but now they are just awfully bad investment plans ;-)
House prices are low now, and possibly troughing (or possibly not? Who knows?) which makes it a reasonable time to buy (as a place to live long term, not as an investment). However the endowments are reduced at the moment by about 15% due to MVR as well so any benefit of house prices being low is cancelled out by that. The gamble is, will house prices rise before the MVR is taken off?
If it was a with profits endowment there will be a minimum payout. With profits generally have a basic sum assured (less than the life insurance payout) and used to get annual bonuses. The basic sum assured and any annual bonuses are guaranteed.
Most endowments had a minimum guaranteed amount hidden somewhere in the small print. This figure was so much smaller than the predicted amount that advisors used to just ignore them
Well, if it's so much smaller than the target value, then isn't it likely also to be smaller than the surrender value? The SV increases with time, of course, so the answer will depend on how far through the term one asks.
I'd say your dilemma is a bit too complex to be answered on usenet. Someone needs to look at the exact figures to give you any useful advice. I'd recommend going to a IFA.
It's all a gamble ;-). If I had to guess I'd say it will be a long time before either house prices start rising or the MVR is taken off.
Maybe so, maybe not. But whatever it is, it *is* a rise, and it's the first since 2007 - so it's a "start" to rising. Ergo, house prices *have* already started rising.
Your reasoning is uncharacteristically fallacious. You have shown that one condition has been satisfied which would allow it to be called a "start", namely that it was the first since whenever. But you've omitted to satisfy another, namely that we need to see a chain of consecutive rises, of which this one can *be* the first.
So if it turns out to be a blip, if this rise isn't the first of more than one, then it won't be the start of anything (except of itself, which doesn't count), and hence you can't really claim that prices have started rising. So wait and see.
Assuming that this follows the patterns of previous credit bubbles (and it has so far) then there's a way to spot the bottom.
Just as at the peak of a bubble happens when the last bears give in and optimism reins, the bottom is marked by the last optimists giving up and the prevailing view is one of pessimism and despair that prices will never rise again.
This would usually follow a capitulation - one last savage fall in which prices drop again by the same proportion that they've already fallen from the peak.
Most likely things will bump along the bottom for a long time before they finally do start rising again. Typically the previous peak prices (in real terms) are not again reached until the following bubble ( around 2060 or so). That's if the primary asset is the same in the next bubble, which it usually isn't because people tend to remember pain of the bust and are wary of again speculating in that asset, and teach their kids to avoid doing so.
Yes it can, in an abstract sense. But if something is both first and last, or both the start and the end, one would not, in the real world, remark upon it. It would then be a blip and it makes no sense to try to extrapolate the prospect of further rise from it. To remark that it "has started rising" tries to do just that.
I don't. We only get fed monthly statistics. If weeklies were available, there could have been a big rise in week 1 followed by three drops.
Anyway, how do we know there even *was* a rise? The reported rise could easily be bogus: All we are told, I think, is that the mean price of *those properties which actually sold* this March was higher than last March. This observation could be consistent with an actual price fall rather than rise. There could have been an increase in movement in the upmarket sector, encouraged by desperate sellers dropping prices, while at the more downmarket end properties have not been shifting.
You said 'it's a "start" to rising'. While you did not explicitly mention the future, this is implied. Any talk of a start to some movement carries with it the implication that the movement will at least continue, or even accelerate.
They have risen. That doesn't mean they have started rising.
Well I don't reckon those two conditions are enough, I think they need to continue to rise, for at least one more month, before we can talk of a start. And then if after the 2nd rise there is no 3rd rise, we can talk of a "false start". :-)
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.