Straw poll: What to do when endowments mature?

paul0evans1

Seasoned participants in this forum will probably think this is a stooped question, but please bear with me.....
If you had a number of different endowment policies maturing at different times, that you were using to pay off an interest-only mortgage, would you....
a) Reduce the size of the interest only element of your mortgage each time by paying down the value of each policy as it matures?
b) Keep the mortgage the same size for now and re-invest the matured endowments in the hope that they will grow fast enough to enable you to shorten your mortgage?
Please disregard the forum rules on this one. I know you’re not *supposed* to say someone is stupid, but in this case I wouldn’t mind if it is, indeed, a daft question.

Dan_1976

LOL, no such thing as a stupid question.

If only we had a crystal ball though!

I personally would pay them off the mortgage. By trying to play the game again you could lose the lot and end up with an interest only mortgage.

If it was mortgage linked I may re invest.

sheslookinhot

I would consider reducing the mortgage term.

Gorgeous_George

Depends entirely on the rate that your mortgage is set at and the rate your investments are expected to return.

If you can earn 6% after tax (like I do) then paying off a mortgage that costs 1.24% (like mine) would be stupid.


GG

Peelerfart

George has just about summed it up .

It depends on the rate

paul0evans1

Thanks all! I think I'm being nudged as follows: - if I'm really adept and arranging my personal finances, then keep the mortgage going and invest the earnings as their growth with outstrip the mortgage. If I'm not (and I'm not!) then pay down the mortgage.

Annisele

You also need to consider whether your lender will charge you an early repayment penalty for paying off any part of the mortgage before the end of the term.

Even if they do, it still might be worth making the repayment - but take it into account in your calculations.

dimbo61

The other thing to take into account is
Say your endowment matures and you have £20K sitting in savings accounts and a £100K mortgage and you lose your job !
Well the nice people at the benefits agency ask have you got savings over £16K?
So then they tell you to live off your savings
But if you used the money you put into an endowment to pay off the mortgage well end of story you have little savings and an £80K mortgage!!!!
Your savings have to be earning more after TAX than your mortgage rate.
Build up an emergency fund of 3/6 months of income

Dan_1976

paul0evans1 wrote: »

Thanks all! I think I'm being nudged as follows: - if I'm really adept and arranging my personal finances, then keep the mortgage going and invest the earnings as their growth with outstrip the mortgage. If I'm not (and I'm not!) then pay down the mortgage.

Yes not everybody are financial wizz kids, and that is not a bad thing. Just keep it simple and do whats best for you.

Check with your lender that you wont get hit with a penalty and reduce the mortgage. Its very well saying you can get 6% like Mr Perfect, but, rates can change and so can mortgage rates.

Good luck whatever way you go.

:beer: