Shall i cash in my clerical medical flexible mortgage plan?

Alisonb1975

We have had a clerical medical flexible mortgage plan since early 1999. It was originally meant to pay our morgage of £52,000. We have since moved and increased our mortgage by £20,000 so have a part interest only and part repayment mortgage.

The problem is, that this plan could have a potential shortfall of £21,000. We could cash it in and get £9,700 back which we would use to reduce our mortgage and change the lot over to a repayment. As the interest rates are quite low we could reduce our remaining morgage term by 4 years to 10 years with only a £60,000 mortgage.

My husband is reluctant as the surrender value is around £3200 less than we have paid in. My argument is that we have had the benefit of life insurance with critical illness cover for almost 11 years.

Any thoughts and advice would be gratefully appreciated.

EdInvestor

Post some more info

Guaranteed sum assured
Declared bonuses
Surrender value
Maturity date
Maturity forecasts
Interest rate payable on mortgage

Alisonb1975

Guaranteed sum assured for joint life insurance / critical illness is £52,252 (I have another life policy for th remaining). Surrender Value yesterday was £9732 - Was due to mature February 2024, Interest of mortage at the moment is 5.29 fixed but due to finish in a few months. Could get a fixed with abbey for 2 years 3.89 or a tracker for 2.79 also for 2 years.

Just found the most latest projected figures (which are actually better that some previous ones)

If growth is 4% - £40,600
6% - £52,100
8% - £65,800

These figure are the latest which we received 10 months ago.

EdInvestor

Could you please call them and update the maturity forecasts, much has changed in the last year.

Alisonb1975

Thanks, I will give them a call today and get some updated figures.

I have just looked at the document and the above figures quoted are if I increase my payments by another £44 per month which I have no intention of doing. at 4%, 6%, 8% the figures early this year were actually, shortfall of £22417, £12971 and if growth was 8% £1,217

Alisonb1975

Updated maturity forcasts:- exact target maturity value £52117 - 19th February 2024.

4% £23017 shortfall
6% £14317 shortfall
8% £3717 shortfall

EdInvestor

Apologies one more figure needed is the monthly premium.If there is any way you can separate out the part of the payment for critical illness, that would be helpful.

Alisonb1975

£97.62 per month. It doesnt give any split whatsoever for the critical illness lifecover. The monthly premium includes £3.76 for Waiver of Premium (whatever that is).

EdInvestor

Alisonb1975 wrote: »

Updated maturity forcasts:- exact target maturity value £52117 - 19th February 2024.

4% £23017 shortfall
6% £14317 shortfall
8% £3717 shortfall

The outcomes according to these forecasts are
4% 29100
6% 37800
8% 48400


If you cashed in the policy now and used the lump sum to reduce the mortgage, also adding the premiums to the mortgage payment until maturity, your return would be £47,658.But this doesn't account for the cost of the CI policy.Really you need to do a quick costing of replacement CI cover (assuming you want to replace it) and then post the amount of premium remaining for a proper comparison to be made.

Alisonb1975

Thanks for getting back to me so quickly, you have been very helpful. The return of £47658 sounds good and we wont have the worry of a shortfall. We have a current joint life insurance which I think is adequate for our needs so wont be taking out another life and CI Policy.