Mid-term Endowments versis offsetting?

drewwa

Question for you all...

I have an offset mortgage (Base + 0.95%) of £157k
Total offset cash (some in ISAs) of £44k
Effective mortgage therefore £113k

I also have 2 endowments from a previous mortgage (targetted to pay out £84k, but falling short - surprise, surprise) which also provide life cover.

These are: L&G currently worth £13.9k(target=£46k) respectively
and Aviva (was CGNU) currently worth £19k(target=38k). (Monthly costs are £86 and £87 respectively)

The L&G one matures in late 2019, and the Aviva one in mid 2020.

Question is: Would it be better to:

a) cash these in, increase life cover on the current mortgage and offset the lump sum and the monthly endowment DD's? (Loosing end of term bonus etc)

b) continue to pay these endowments as is? (they are making about £250 on top of contributions each year at present) which doesn't seem great.

Cheers,

Drew.

getmore4less

if that is barclays(ISA offset) get some of that offset money into their monthly saver the rate(3.25) is better than the mortgage after HRT.

dunstonh

How are the endowments invested? What mortgage promise value (MEP) is there on the Aviva endowment? What is the cost of replacement life assurance (and CI cover if included)? What are the costs of surrender? What are the current positions/values compared to the surrender value compared to the projected value?

drewwa

Will have to look up the records and get back to you. Paperwork is in the file drawer at home!

Cheers,

Drew.

drewwa

Will take me a few days to assemble this info. Will update the thread when I have it.

Many thanks,

Drew.

Jonbvn

OP,

Given your low mortgage interest rate, you can do better with your cash ISA's outside of your offset.

drewwa

Ok folks, here's the detail I've managed to assemble

Provider : L&G, Unit-linked and with profits
Guaranteed sum assured : £47,025
Declared bonuses : £465.99
Surrender value (today) : £15,014.47
Monthly premium : £86.83
Maturity Date : 02/12/2019
Forecast : 4%-£28,820 6%-£33,930 8%-£39,740

Provider : Aviva with profits (was Norwich Union, was CGNU)
Guaranteed sum assured : £37,475
Declared bonuses : £3,196.30
Surrender Value (Today) : £13,231.04
Monthly Premium : £87.64
Maturity Date : 09/07/2020
Forecast : 4%-£29,800 6%-£35,200 8%-£41,700

In terms of lifecover for this aspect of the mortgage, it turns out (rather stupidly of me) that I've already covered it elsewhere. I clearly had a view that I would revisit the endowments at some point and converted the entire mortgage to repayment, thus the entire mortgage also has separate life cover. On the plus side, that does atleast mean I won't need to create separate life cover if it makes sense to cash in these endowments.

Can't find any reference to an MEP on the Aviva documents I'm afraid.

Thanks for help so far, and please advise if I need to provide any more info!

Cheers,

Drew.

dunstonh

Can't find any reference to an MEP on the Aviva documents I'm afraid.

You wont do. They dont point it out anymore. You either have to ask them what the maximum mortgage promise value is or you can look at your 2001 or 2004 statements when it last appeared on them.

It makes a difference as I have seen MEPs with over £10k. You only get the MEP payment if you stay until maturity. The MEP value is not included in the projections. So, you add it on top. Hence why its vital to know. If its £500 then you may think its not worth the bother but if its £10k then it can change your mind.

drewwa

Just off the phone...

MEP for Aviva = £4,675

Cheers,

Drew.

dunstonh

Right, so you need add that to the projection figures. Although the cap is the target amount. i.e. your 6% projection is £35,200. Your target is £37,475. So, the MEP added to the 6% exceeds the target so you will only get the increase to the target.

However, that does put the Aviva plan on track to hit target. Plus, endowment mortgages are typically cheaper than repayment and you have the life cover there. So, the Aviva one is looking good.

L&G is not looking as good if its in the with profits fund.

drewwa

Many thanks.

Given my overall priority is paying off the mortgage as soon as possible, I'm trying to gauge whether it makes sense to divert the premiums and the cash-in value to this end.

I don't have a particular need for a cash lump sum at the 2020 point so would be willing to take an overall numerical 'hit' in order to increase the rate at which the mortgage is completed, but clearly don't want to throw away significant amounts.

Currently my own calculations indicate that paying the mortage off prior to 2018 is going to be the best I can achieve at present. With an extra £28k in the pot and the monthly premiums redirected to overpaying, I calculate this could put me into the early 2015 area.

Cheers,

Drew.