Any endowment advice out there???

money_muppet_2

I have an underperforming endowment mortgage for £50,000 with the Alliance and Leicester at 3.54%.
£40,000 of this started in October 1988 and matures in October 2013, costing £130.63 per month.
A low cost endowment policy provided by the Police mutual assurance was taken out at the same time to cover the funds and costs £53.13 per month.
This has a current surrender value of £20323
The 40k endowment matures 17th Oct 2013 and guarantees £27,505.14 at maturity with projections of
£32,000 @ 4%
£35,400 @ 6%
8,800 @8%

The remaining £10,000 started in May 1991 and matures in May 2013 costing £29.61 per month.
A low cost endowment policy provided by the Police mutual assurance was taken out at the same time to cover the funds and cost £17.25 per month.
This has a current surrender value of ££4,940
The 10K endowment matures 6th May 2013 and guarantees £6,357.57 on maturity with projections of
£8070 @ 4%
£8920 @ 6%
£9770 @ 8%

So here is the question...Do I stick with the existing endowment mortgage and stand a potential £16,138 at the end?
Do I cash in the endowments now and take it off the total loan leaving around £24737 to pay off by some other method??

Any and all advice will be appreciated as i really am a money muppet !![/font]

EdInvestor

money_muppet wrote: »

A low cost endowment policy provided by the Police mutual assurance...guarantees £27,505.14 at maturity with projections of
£32,000 @ 4%
£35,400 @ 6%
8,800 @8%

If you cashed in this endowment and used the lump sum to reduce the mortgage also increasing the mortgage payment by the amount of the endowment premium, at maturity you would have a return of 26,052.This is less than the endowment's guaranteed maturity value and substantially below the lowest projection.

You are likely to be better off if you keep this endowment.

The 10K endowment matures 6th May 2013 and guarantees £6,357.57 on maturity with projections of
£8070 @ 4%
£8920 @ 6%
£9770 @ 8%

The second endowment is not quite as good: if you proceeded as above then you would have a risk-free return of 7215 at maturity, higher than the guaranteed value, but below the bottom projection.

I suggest you keep this one as well and increase your monthly mortgage payment so as to overpay while interest rates are very low, and thus reduce the shortfall.

You can review the position later if your mortgage rate later goes up (eg to 5%+) at which point it may be better to cash in.

money_muppet_2

Top job, thanks for the advice.

All advice welcome..........