Who's good at math's ?, 2 endowments , 1 mortgage

newtomoneysaving_2

Hi All,

New member here so hope someone can understand....:o

Currently am paying 2 endowments & 1 repayment mortgage

Question is shall I surrender the 2 endowments and pay off a lump sum on mortgage.

Endowment 1 , ends in 2016,
Currently estimated maturity @ 6% each yr is £21,500
Costs are £64 per month with a 5% yearly increment on payments.
Surrender Value is £7800

Endowment 2 , ends in 2016,
Currently estimated maturity @ 6% each yr is £10,500
Costs are £24 per month
Surrender Value is £4100

mortgage is £100,000 with 15 1/2 years remaining,currently 5.29% fixed till 2009

Is it worthwhile surrendering or not, I have been quoted to pay £10,000 off m.gage payments will decrease from £790 to £710

Any ideas????

thanks

dillydilly

Have you exhausted the endowment compensation route ? We took ours out in 1990 for a similar amount as your first one, and got compensation about five years ago for £21k.

Regards paying off the capital - this is usually prefeable to having savings, unless you can get better than 5.29% on a savings account. Again in our case Mrs Dilly is not working so we can get gross interest, in which case its better not to pay off and leave in savings.

Xbigman

This isn't about compensation, its about maths.

From my reckoning both endowments will make a profit, but they certainly would if you pump in more money and assume 6% growth. The more interesting question is how long you have paid in already. If they have 10 years to run then I assume you have paid in £64 for 15 years on the bigger one, which is 11k (ish) for a surrender value of 7800. Now that is safely classifiable as a loss. Although (on a 25 yr endowment) the performance so far seems poor its essentially locked in and not worth taking into account.

The numbers for the smaller one should be similar, relatively speaking.

Another point for consideration. What rate are you paying on the mortgage? If less than 6% then the endowments are projected to earn more. If more than 6% you should forget about the endowments for now and prioritize a remortgage or refix to a lower rate ASAP.

My opinion is;
Do you need the money? If not then keep paying in. There could be valuable terminal bonus's that you would throw away if you cashed in.
If you need (or really want) the money then you could surrender them, but you would be far better off selling them on.
Regards


X

newtomoneysaving_2

thanks for your replies

to update, endowment 1 started in 1991 and was circa £30 per month at start ( has a 5% increase per annum, currently £64 per month)

endowment 2 was started in 1994 and has been fixed at £24 per month

mortgage is fixed @ 5.29 till 2009

thanks again

nelliebag

6% seems a bit optimistic, I think 4 is probably the best you will do - my advice is go to a good IFA (preferably someone recommened to you )- let him work out the maths AND handle your complaint with the ins company. Also he can probably get you a good repayment mortgage and if you use the surrender proceeds to reduce the amount of the loan dont forget that overall your interest bill (and hence the amount you repay) will be massively reduced. Its worth paying an IFA as you could SAVE 000's of £ from the remortgage and also RECeive 000's of £ from the insurance company.

newtomoneysaving_2

Hi Again,

My thinking behind the scenes was to surrender the policies if worthwhile and use the surrender values to pay a one of lump sum from my current repayment mortgage. Can anyone clarify if in the long term this will be more viable (profitable to myself ie saving money) than waiting for the endowments to mature and then using that to pay off a larger sum in 10 years from now instead.

I had roughly calculated that paying a 10K lump sum now will save me approx 15K in the long term, i.e a 5K saving as well as not having to pay the monthly endowment costs, currently circa 90 pound.

Re compensation / misselling of endowments I have no idea where to go or what I need to do,

I'm not in touch with any IFA as I have no previous history or experience. Am located in Staffs/ North Warwickshire border

Just woke up this week with the idea of trying to save some pennies after finding this excellent forum.

thanks

Gorgeous_George

Hi

I estimate that if you cashed in or sold your endowment policies, reduced your mortgage and paid £88 permonth extra off your mortgage, you could be mortgage free in around 11 years. This assumes that you do not have a tax liability if you cash in the endowments and also assumes that you do not need the life cover that the policies bring with them.

It's quite a difficult call as no-one knows for certain what EPs will do in the future. I doubt they will do as well as mortgage rates but you need to make the call.



GG

Finishrich

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1138020285,19271,

Check out the above link on the main site about endowments.

mrs_deadline

Another thought, the cost of replacing life cover can cancel out some of the savings from stopping an endowment. Depends if you need the life insurance. It's essential to get an IFA to look at your overall situation before making your decision.

EdInvestor

Post the gollowing additional info for a proper judgment:

Which insurance companies are they with?
Guaranteed sums assured
Declared bonuses

Post all maturity projections, not just @6%

newtomoneysaving_2

Hi All, Many thanks for your help so far

I have listed some more info below to hopefully help factor what is best advice

Endowment 1) Guardian Financial Services
Freedom for Homebuyers Policy started august 1991 ends august 2016
target value was £33,500
current montly premium £63.71 per month , 5% increase per year
surrender value, NOV 2006 £7756
projected amounts
4% £18,600 (£14,900 shortfall)
6% £21,500 (£12,000 shortfall)
8% £24,900 (£8,600 shortfall)


Endowment 2) Prudential / I think this was Scottish Amicable originally
started sept 1994 ends sept 2016
target value £13050
montly premium £23.90
surrender value NOV 2006 £4100
(((with profits clusters ?? £2220)))
(((investement linked clusters ?? £1880)))
projected amounts
4% £9030 (£4020 shortfall)
6% £10500 (£2550 shortfall)
8% £12300 (£750 shortfall)


Guaranteed sums assured
Declared bonuses

I don't know where this info is sorry?