endowment - should I continue paying or cash in now?

SailorSam

When i moved house a couple of years ago, the house was finished but i still have a small endowment mortgage which hadn't done well, it's due to end in a little over a year so i've hung onto it. Surely it can't fall any further.

hannaht

EdInvestor wrote: »

And can you please confirm the mortgage rate you are paying?

Nationwide 2.5%

hannaht

G_M wrote: »

You could also consider selling your policy. There are companies which buy these, usually for more than the surrender value, and make their money by holding them till they mature. Be careful to ensure you fully understand any quotes/contracts you receive, but this is an accepted way to increase their value to you.

Read the FSA explanation here.

Here is an example company, but just google 'sell endowment' for many more.

Thanks for the info and for those links, I will have a good look at them.

hannaht

SailorSam wrote: »

When i moved house a couple of years ago, the house was finished but i still have a small endowment mortgage which hadn't done well, it's due to end in a little over a year so i've hung onto it. Surely it can't fall any further.

Have you carried on paying into it or did you just leave it as it was?

hannaht

hannaht wrote: »

Thanks for the info and for those links, I will have a good look at them.

I've tried a few of the companies websites to try to get a quote for selling the endowment and haven't been able to - is it because my endowment is unit linked, or is it because of the company (countrywide)?

If anyone has any idea I'd be v grateful!

Thanks

dunstonh

unit linked plans have a daily value so there is no reason for anyone to pay more. If i wanted 1000 units of the fund you are in I could just buy them at the retail price. There is no reason for me to pay you more for them.

If you had a £10 note would you expect anyone to give you £12 for it. That is effectively the case with a unit linked endowment.

hannaht

Ah thank you, that makes perfect sense. So my options are to keep or surrender then.

Thanks for the reply

EdInvestor

hannaht wrote: »

We have alternative life cover so that isn't really an issue in our decision. The maturity date is Sept 2022 and the maturity value she just quoted me was £65,400 that was at 6% growth. By that time we will have paid in £42k.

We pay in £140 per month.

If you cashed in the policy now and used the lump sum to reduce the mortgage, also increasing the monthly mortgage payment by the amount of the premium, at maturity your return if rates remained at 2.5% for your loan would be £49,758, with no risk.

This compares with a forecast 6% return of £68,557 if the money continued to be invested in risk-based shares in the markets.A 4% return over the period would net £57,058.

You are paying for unnecessary life cover (and tax within the policy), but your mortgage rate is so low that you could still come out ahead by sticking with the endowment.It may be bettter to hold on until loan interest rates rise to around the 4% level and then cash in and start overpaying the remainder of the loan.

hillcats

Have you considered if you was mis-sold this policy?
Were you given the full facts about the policy?
Were you told that the endowment would pay your mortgage easily AND provide you with a lump sum at the end?

You may have a case to consider if you surrendered the policy before maturity or possibly at maturity, I don't know.
I honestly don't know if you can start this claim with the policy still active, I'm sure someone will know the answer though?


We surrendered our two policies when we changed over from interest only to repayment (on our first house) many years ago, and we were paid out for these. It was only recently within the last 3 years that we complained that we were mis-sold our policies as we were told all the lies etc luckily I still had paperwork, as I tend to keep most things that I think may be useful in later years, and we were compensated by the company.

Some food for thought....

hannaht

EdInvestor wrote: »

If you cashed in the policy now and used the lump sum to reduce the mortgage, also increasing the monthly mortgage payment by the amount of the premium, at maturity your return if rates remained at 2.5% for your loan would be £49,758, with no risk.

This compares with a forecast 6% return of £68,557 if the money continued to be invested in risk-based shares in the markets.A 4% return over the period would net £57,058.

You are paying for unnecessary life cover (and tax within the policy), but your mortgage rate is so low that you could still come out ahead by sticking with the endowment.It may be bettter to hold on until loan interest rates rise to around the 4% level and then cash in and start overpaying the remainder of the loan.

Thanks so much for taking the trouble to calculate all that for me. I'll have a chat with im indoors and see what we think. Thanks v much, really appreciate that info.