5 years left on endowment mortgage

Airedale

I have 5 years left on my endowment mortgage and am considering surrendering the policies and paying of the capital early.

My original loan was for £41,500, I have reduced that by overpayments to £26,000. I've had surrender quotes for the two under performing policies for £15,000 and £5,000 respectively. This would leave a shortfall of £6,000.

At a rough calculation I reckon if I continue paying the endowments of £35 and £30 and a monthly mortgage payment of £165 over the next 5 years it will cost me around £13,750.

Alternatively, I can surrender the policies and make up the shortfall from savings. It all sounds a bit to straightforward. Anyone in a similar situation or got any sound advice?

hydsta

Generally speaking you should hold on to them as there meant to be there for the long term and you'll lose your terminal bonus if you surrender them. By your calculation you've got to pay £9850 in interest over the next 5 years. The rest (£3900) is your endowment premiums. Your endowments are currently worth £20k. Obviously if you hold on to them until they mature there will be no surrender charges so they'll be worth a bit more. If you think that your endowments will provide more than an extra £9850/year then hold on to them, if not then your just wasting money paying into your premiums, especially if they ask you to up your payments to try to make up the shortfall. Essentially thats throwing good money after bad especially in this market. But bare in mind that your policies provide life cover. It might be better to surrender now and use £6k from your savings to save having to pay £9850 in interest over the 5 years. Best to consult with an IFA before surrendering any policies.