Mortgage maturing before endowments

clutterbuk

Hello,
Advice sought, my £45,000 mortgage term ends in April 2009. I have two endowments covering this (both will fall short!) anyway my problem is they dont mature until Nov. 2009. So I have these options:-
1/. extend term of mortgage to Nov. another 7 months intrest payments approx £2000
2/. end endowments in April. ??? 7 months early ....will I loose out
3/. end endowments now and bank money in highest intrest paying instant access account. saving £600 in monthly payments till April 2009

As option 3 seems obvious My question, which the endowment companies seem unable to answer is will I loose out by cashing in the policys early , either now or in April. with only 13 months to go till maturity.
Thanks to anyone who has any opinion.
clutterbuk

dunstonh

option 1 is the conventional method. As people move and remortgage over the years it is normal for the redemption date to get out of sync with the maturity date. Normally mortgages (arranged through advisers) would carry the redemption date to the next date after maturity but lenders dont tend to have an issue rolling the mortgage on.

My question, which the endowment companies seem unable to answer is will I loose out by cashing in the policys early

They can tell you the cost and penalty of surrender now but they cannot tell you what the value will be on maturity. Only thing they can say is that there is no penalty on maturity.

clutterbuk

Thank you for taking the trouble to reply,
Problem is taking option 1 will involve paying out another £3,500 (£2,000 extra intrest and £1,500 in endowment payments).
The online valuations I have from Standard life give a cash-in value now of £24600(including final bonus).
The projected value on maturity at the highest rate is only 26,200. on these figures surely its best for me to cash in now. seeing as its going to cost me another £3,500 to make the two meet. Or am I missing something??
Thank you very much for your time and opinion.

dunstonh

Many standard life plans have an endowment promise value (these have been seen as high as £10,000). If you surrender early, you will not get that. So, you should find out what your mortgage promise value is.

You say the surrender value is £24,600. What is the current position (basic sum assured, plus annual bonus, plus terminal bonus, plus mortgage promise value)?

EdInvestor

Post the following figs on the policies and we can give a view

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date
Maturity forecasts
Interest rate payable on motgage

Are there any penalties payable if you paid off part of the mortgage right now having surrendered the endowment(s)?

clutterbuk

Mortgage Endowment promise ive been told is between £282 and £423.

Current Surrender Value as of 21 Sept 2008

Total Fund Value 20,609.49 Final Bonus 3,982.30 Total plan value 24,591.79
Monthly premium is £114.62
Maturity date is 11th Nov 2009
intrest rate is 7.09%
Maturity forcasts low £25,200.00
Medium £25,700
High £26,200
I believe there is now no penalty for paying off the mortgage.
Thats all I have in writing. Its a Life With Profits Fund

Thanks again.

getmore4less

If the mortgage is £45k and the endowments only going to pay £24k-£26k then you will have to extend the loan anyway.

clutterbuk

I have another endowment with Norwich union took out 24 yrs ago with low monthly payments, which will take me up to low £40k. Its this Standard life policy thats out of cinque? with the mortgage and I've an issue with. Thanks

EdInvestor

clutterbuk wrote: »

Mortgage Endowment promise ive been told is between £282 and £423.

Maturity forcasts low £25,200.00
Medium £25,700
High £26,200
I believe there is now no penalty for paying off the mortgage.

If you surrendered this policy now and used the lump sum to reduce the mortgage owed (assuming no penaltieds to repay early) , also increasing the mortgage payment by the amount of the endowment premium each month, then at maturity your total reurn would be 27,768.

This is higher than the best return projected by the endowment plus the (unguaranteed) promise value at a time when terminal bonuses are being cut.

It would be almost certainly better to dump this policy and proceed as above asap.

You may also be best to surrender the NU policy (if it is not in line for a windfall) right now as well because its terminal bonus is likely to be cut again in the time before the policy matures, so you could get less than its value now.

Post the same figs for that policy if you want an evaluation.