Should i cash in my endowments to improve my LTV % rate

rockadog

As my house (The house is only 16 months old) valuation drops more each day and my fixed rate mortgage runs out in March.I'm looking at cashing in my 3 endowments which have surrender values ( I am in the process of getting quotes to sell them) totaling 40k to offset the the margin of the valuation of my house against my mortgage total thus enabling me to get a mortgage with a 75% LTV.My mortgage is split into two parts an interest only which is on a tracker rate of BOE base rate plus 0.44% amount of 47K which I'm in the process of changing to a repayment on the same deal.Then i have a repayment of 158k on a fixed rate of 4.99% that ends at the end of March which reverts to the lenders SVR.
Cashing in the endowments, stopping the premiums and getting a 2 year fixed rate of 4.69% which my lender is offering on a 75% LTV would save me £300 a month if i reduce my repayment mortgage from 158k to 118k.Is what i'm thinking of doing a wise or short sighted move?:rolleyes:

EdInvestor

It could well make a lot of sense but you need to post some info about the policies.

Provider
Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date
Maturity forecasts

rockadog

Norwich Union Policy, Sum Assured £8631, Bonuses £5902,Surrender value £15985
Premium £29.56, Matures March 2011
Maturity Forecasts, 4% £18500 6% £20100 8% £21800
Aimed to meet £21000

Royal London Policy , Sum Assured £7365, Bonuses £5464,Surrender value £10174
Premium £27.80, Matures December 2014
Maturity Forecasts, 4% £16700 6% £17300 8% £19300
Aimed to meet £15000

Prudential Policy, is split 50/50 with profits and unit linked

With profits total £5541 Unit Linked Value £6603
Premium £73.30,Matures April 2015
Surrender Value £13929
Maturity Forecasts, 4% £22800 6% £26700 8% £31300
Aimed to meet £29600

The total target for the endowments is £65600 but i only need £47000 as I've been paying some of this off through the years.Hope this added info helps EdInvestor

Gorgeous_George

It's late and I'm on holiday so cannot look at the figures in any detail.

However, if (or when) I look I am sure I will only confirm that cashing in is best. I have never seen a thread where this question (or one similiar) is asked that has come back with a general consensus that the policy should be kept.

Now is a bad time for endowments IMHO and cash will prove to be a better bet when saved in a safe building society or paid off against a mortgage (despite the low rates). This will b the answer for a few years yet.

GG

Rick62

I can't comment on the value of cashing in now versus keping the endowments (although I personally cashed in my endowments a few months ago - with the markets down I'm not expecting great performance from endowments), however the principle of reducing your LTV in order to get a better rate on the mortgage sounds sensible to me.

EdInvestor

rockadog wrote: »

Norwich Union Policy
Maturity Forecasts, 4% £18500 6% £20100 8% £21800

If you cashed this one in and used the lump sums and premiums to pay off the mortgage directly then at maturity your return would be 19,501, guaranteed. Although NU policies in general are likely to perform in the 6% range, they won't make that in the next few years, and yours matures after 3, so it's unlikely you will do any better by taking a risk and continuing with the policy.

Royal London policy
Maturity Forecasts, 4% £16700 6% £17300 8% £19300

If you proceeded as above with this one, your return at maturity would be 15719, whioch is considerably less than even the lowest forecast.Royal London policies are generally good performers, and I would keep this one.

Prudential policy
Maturity Forecasts, 4% £22800 6% £26700 8% £31300

Using this one to pay off the mortgage would result in a return at maturity of 24,399. You would expect this split policy to return at least 7-8% over the 6 year period, so there's enough extra gain likely to hold on.


Unusual to find someone with three endowments two of which are good performers and one not too bad. If the NU one was originally with GA or CU and is due a windfall, or if it has a "mortgage promise" it too might fall into the good category, but not by much.

Worth reviewing the position again when you remortgage, as obviously a higher mortgage interest rate can change the position entirely.

rockadog

Thanks for your time and help EdInvestor, it was most informative and welcomed,Your assessment of my policies put me in a little bit of a quandary,all be it a pleasant one considering how other peoples policies are performing.Once i get a fuller picture of what my house values at and my LTV % next Month I can at least put the policies in a order of cashing in if i need too or depending what I'm offered by my (or other) Lender i may keep all three.( I am keeping the Royal London policy if i can,it's the only policy I've put up for valuation via the APP web site that's attracted any interest).Oh, the NU policy was originally a Provident Mutual policy but has no Mortgage Promise as it was on Track (Green) when the promise was issued to those on Under-performing policies.

EdInvestor

rockadog wrote: »

Oh, the NU policy was originally a Provident Mutual policy

Ah, not likely to be a strong performer then, I would let this one go.