Shortfall problem with my endowment mortgage
I was sold an endowment policy about 19 years ago, at the time I was assured the policy would be more than adequate, to repay the amount in question. Today I receive a letter stating there was now a shortfall and I would have to increase payments to make up the shortfall. Has anyone else had similar problems?
You have a number of options, not just increasing your payments...
1) Basically, you could convert part of your mortgage to capital repayment - your payments would then create the same effect as saving monthly with a guaranteed rate of return equal to your mortgage interest rate.
2) You could increase the premiums into your endowment as you have been advised in the letter, but there are no guarantees as to what growth you would achieve.
3) You could set up a cash ISA, as it is a safe bet in raising the difference required to pay the defecit.
4) Apart from increasing premiums into your endowment you could give yourself some exposure to other pooled investment vehicles like 'medium risk' unit trusts, investment trusts and open ended investment company shares all of which could be contained within an ISA wrapper for tax efficiency. The underlying funds of these products could also be 'tailored' to your risk profile and it is quite possible to have 'low risk' unit trusts.
Choose wisely Duncan!