Another cash in Endowment or not thread - sorry

Willow147

Hi all,

I'm at the end of my 2 year tracker mortgage and am reviewing my situation. The current mortgage is for (£57000) and is split, £19000 as repayment and the rest as interest only and has 13 years to run.

I also have 2 Friends provident endowments which have 8 years left to run, each of these were set up to cover a £32000 mortgage (totalling £64000).

Over recent years the annual bonus added in has plummeted and so I want to see if it's worth continuing with these or cash them in and payoff some of the mortgage.

Endowment 1 (about £40/month)
Cash-in Value : £14,268
Maturity (4.0%) : £20,200
Maturity (5.5%) : £21,900
Maturity (8.0%) : £24,900

Endowment 2 (about £51month)
Cash-in Value : £12,181
Maturity (4.0%) : £19,900
Maturity (5.5%) : £21,700
Maturity (8.0%) : £24,900

If I was to cash these in (these values were valid in April so I dare say they have changed now) and pay off the mortgage, change the outstanding to repayment but keep my monthly outgoing the same (i.e. pay into the new mortgage the same as I currently pay into the mortgage and endowments) I can pay the debt off in about 6years 6 months (according to a couple of mortgage quotes I had).

I know nothing about the financial market but like the idea of the early payoff. Is it in my financial interest to cash these endowments in (or sell them - but that may take too long from what I understand) or should I keep them.

Thanks for any help you may be able to offer.

Gorgeous_George

If you hold onto them there is a risk that they may not pay your mortgage in full. However, they provide some life insurance.

Cashing them in and paying your mortgage by a repayment deal guarantees that the mortgage will be repaid in full after a set time.

I fear taht there may be a lot more pain to come in the financial markets and have recently cashed in my Standard life and Friends Provident policies. The latter has been a complete turkey.

GG

dunstonh

FP do unit linked as well as With Profits. The unit linked endowments can be quite good and there is a fair range of funds available. The next 24 months could be a good time to be making contributions into a unit linked endowment.

expert_ease

Have you shopped around for the best cash-in value, it's suprising how much some companies can vary in their valuation.

dunstonh

We dont know if its unit linked or with profits so selling may not be an option.

Willow147

One of them is 'with profits' (the first one), the second one isn't but I'm not sure what it is (excuse my ignorance) until I get home and can check the paperwork.

TCA

Your first endowment sounds identical to my FP policy which I have also been considering selling - although yours appears to be doing a bit better. Same term remaining and initial mortgage target amount though.

I've been checking the surrender value every month after each payment and last week it dropped to £8,953 from £10,407 the previous month - almost £1,500! My surrender values have risen every month for the past year in a falling stock market so I presumed that there was little volatility resulting from stock prices and most of the holdings were of a fixed interest/cash nature - so was going to sell up. Previously there seemed to be an annual correction on the anniversary of the policy but this is obviously now not the case.

I'm now back to the same valuation as 15 months ago having put in almost £600 in monthly payments since, so you'd be wise to get an up to date valuation. I now have no idea whether I should wait for it to get any better or just sell up. Logic would tell me that if the stock market returns to the levels of last year then I should see an increase but something tells me this is probably not the case.

EdInvestor

Please provide updated surrender values and tell us the interest rates payable on your mortgages.

Willow147

Sorry for the delay, been a busy boy.

The current surrender value of these policies are (as of 06/08/2008)

Endowment 1 - £13,570 (was £14,268)
Endowment 2 - £11,737 (was £12,181)

That's a drop of £1142 in only 4 months. Time to get out I guess.

I believe I have now moved onto the Halifax standard variable rate (but can't remember the figure).