Endowments-cash in or carry on??

jan49_2

Hi, I would be grateful for any advice on whether to cash in our endowments and pay a lump sum off the mortgage or persevere in the hope that they might improve.I know no-one has a crystal ball for this one but any help that would make my decision a little clearer or options available would help.
My mortgage is with C&G and has 5yrs and 7 months to go with an outstanding balance of £73206.
This is split into £52452 on interest only and £20754 on repayment.
The interest rate is 2.5% and we have been making monthly overpayments since Dec 2009 when we came off our fixed rate.
For the last 12 months we have been overpaying £240 per month off the interest only mortgage to try to cover the endowment shortfalls having previously tried to cover this by moving £10k to repayment.
There is no charge for making overpayments, for converting more to repayment or for making lump sum payments.

We have 3 Endowments which are all showing "red alert"
1. TSB Homebuyer plan for £37k - £52.43 per month , current cash in value at £17208.We have paid in £12321 to date & will be due to pay in a further £3355 if we continue to maturity, projected final amount at 4% = £22k.Shortfall of £15k

2. TSB Homebuyerplan for £3k- £5.50 per month, current cash in value £1407.We have paid £1254 to date & will be due to pay a further £330 to maturity, projected final amount at 4% = £1900.Shortfall of £1,100

3. Friends Provident Mortgage Endowment Plan for £29825-£95.66 per month, current cash in value £13978.We have paid £13030 to date & will be due to pay a further £5548 to maturity, projected final amount at 4%= £22,900.Shortfall of £6925
Total shortfall assuming investments grow at 4% = £23025:eek:

I have looked at the overpayment calculator and the best option would appear to be to cash in the endowments & continue to overpay the current £240 & £150 that I would have been paying in endowments.However, this is providing that we both remain in employment and can afford to keep making overpayments.When interest rates rise then the amount of overpayments will reduce also.

If anyone can give any advice,particularly on whether these endowments are likely to grow at or over the 4% which I have used to calculate my figures on I would be really grateful.:think:

dunstonh

Total shortfall assuming investments grow at 4% = £23025

All of the endowments are unit linked. So, what is the figure at the more realistic 6%?

What does are you values? (recent or further back)

DVardysShadow

Don't forget that there is another £70/month which comes from not having to pay so much interest. So about £460/ month, which is about £31000 paid off over the remaining term of the mortgage - actually, you could do better than this because you will continue to cut the debt.

Remember not to take financial advice from a random bloke on the internet. My take on this is that when interest rates rise this will squeeze the value of equities and you endowments may not do so well. About this point towards the end of a mortgage you need certainty, too. So I would cash them in and perhaps take out some term life insurance to cover some of the mortgage

The pros may take a different view.

jan49_2

TSB 37k- value at 6% = £24600, shortfall £12400 last statement 3/10
TSB 3k - " " = £2090, " £910 " 12/10
Friends 29+K " = £24400, " £5425 " 1/11

Total projected shortfall at 6% = £18735
Thank you

sheslookinhot

DVardysShadow wrote: »

Remember not to take financial advice from a random bloke on the internet.

So I would cash them in.............

:rotfl::rotfl:

Gorgeous_George

I think that the endowment companies have made enough from you. I would surrender them and take it on the chin if i make a bad call.

A bird in the hand and all that...

GG

dunstonh

My take on this is that when interest rates rise this will squeeze the value of equities and you endowments may not do so well.

Equities tend to do better with inflation. Indeed, had the higher inflation continued during the 90s and 2000s then endowments would have likely remained in surplus positions.

TSB 37k- value at 6% = £24600, shortfall £12400 last statement 3/10
TSB 3k - " " = £2090, " £910 " 12/10
Friends 29+K " = £24400, " £5425 " 1/11

You need updated values. The latter part of the last year saw good returns. Good chance you made more than 4% in just the last two months of last year let alone the whole year.

jan49_2

The cash in values I gave in my original post were accurate as of last week

DVardysShadow

dunstonh wrote: »

Equities tend to do better with inflation. Indeed, had the higher inflation continued during the 90s and 2000s then endowments would have likely remained in surplus positions.

Indeed. But they also fluctuate around their trend line according to interest rates, dropping in value when rates are high. There is a gamble, and as I read OP's post, with 67 months to go, they are looking for some certainty over the end of the mortgage.