Is this a good idea?

TurnaroundSue

My brother has a £50k interest only mortgage over 10 years. He has an endowment whereby he is paying £300 a month into. He says that it has 9 years to run and is worth around £30k if he cashed it in/sold it on and is on course (so SL say) to be worth around £82k when it matures.

Now I think his best bet is to cash in/sell the policy and get out the £30k, reducing his mortgage to £20k and then using the £300 make overpayments to the mortgage. When using the egg calculator doing it this way says that his mortgage would be paid on in 2 years and 8 months, saving him a whopping £23k in interest. So by the time he has paid in £300 per month over the next 9 years, taking the £23k saved in interest and getting the £30k out now this amounts to nearly what they are projecting he would get if the policy ran its course.

I think he should cash it in and go along that route, as with the way the market is at the moment, whose to say what it would be worth in 9 years time and also in just over 2 1/2 years time he would be mortgage free and have nearly £600 per month to save and make a nice little egg nest in the remaining time that would have been left on the policy. Also the £30k and everything else is guaranteed, whereas if it waits it is not!!

Any thoughts of any downside/negatives to this plan would be greatly appreciated.

Many thanks for taking the time to read this thread

abouttimetoo

Hi TAS

In principle (sp?) seems like a good plan and the numbers seem to stack up, I think the only barrrier could be mentally/emotionally as I think some people view savings/endowments as a safety net and/or emergency money and take comfort from having money available to them 'just in case' IUSWIM and cashing it in may make him feel a bit exposed.

That's the only thing I can think of really:rolleyes:

How does your brother feel about it?

dimbo61

Just check your brother can get the £30k now if he cashes in the endowment.
Other than that I would go for it and overpay each month and clear that mortgage ASAP.
He will be able to see the effect every month.
Also check that his mortgage lender will allow him to pay off £30k of his debt ! read the terms and conditions of his mortgage deal and speak to the mortgage centre.
Lastly ask to keep the same mortgage payment and consider ISA,s if paying a better rate of interest TAX FREE than his mortgage rate.