Mortgage Overpayments vs Endowment

skaff

Hi all

I took out a couple of 25 yr policies in 1995 and 1997 to run alongside any future house purchase (I bought later in 1997). One is with Standard Life and the other is with Norwich Union (originally General Accident) and I am paying £50 a month each.

Like many other policies they haven't performed as well as expected but because of the bouyant housing market, i no longer need to rely on these policies to cover my mortgage.

I am now wondering whether i would be better off using that £100/month to make overpayments on my mortgages. (i now have 3!) Is it possible to freeze the payments and allow the money already invested to continue earning or would i have to cash in the policies.

Are either of these a good idea or should i carry on as i am?

Thanks for the help in advance guys!

h4nym

If you now have 3 mortgages, then I assume that a couple of them are for rentals? In that case, then pay the extra £100 a month into your own mortgage and keep the tax relief on the other two.

It's unlikely that you'll get a 6% return on your endowment after tax which is what it will need to represent to better your mortgage interest saving.

All the best

H

skaff

Actually, all 3 are rentals! I'm in the military so I currently live in military accomodation.

With regards to the endowments, would it be best to:

1) Keep paying into them

2) Stop paying but allow them to run to their term (can i do this?)

3) Cash them in and use the money to pay off some of the mortgage?

Thanks for the help

h4nym

OK - definately definately don't cash them in early - endowments are all about the terminal bonus which you'll lose instantly and the settlement figure will be poo!

This absolutely doesn't constitute financial advice, ok... but we had the same issue - we decided that we would continue paying into an endowment that we have. Why? Well - it was only 100 quid a month and we could afford it without really noticing.

What should you do? I suspect it's down to a combination of affordability and your expectation of stock market performance over the remaining period. I believe you can decide to stop paying but retain the policy until maturity - there may be an issue with the life insurance element though if you do that!

hth

H

skaff

The life element was one of the issues that occurred to me as well. I think i will continue to pay in to them and just eat more sausage casseroles and use vinegar for fabric softener!!

Thanks for the help:o