Mortgage endowment sell surrender or make paid up

barneys

I am in a position to pay off my interest only mortgage. The endowment (with the Pru)to support this mortgage has 7 years to run and due to converting part of my mortgage to repayment was on target. I am unsure whether to sell, surrender the policy. I also heard that you could make the policy 'paid up' which I understand to mean you freeze it and not make any further payments into it. The endowment is with profits, would this mean annual bonuses would still be applied. Any advise on this possible action would be appreciated.

Addiscomber

Is anyone able to answer the OP's question, please, as we hope to be in a similar position eventually and would be interested in the answer.

Presumably there is no law that says that the proceeds of an endowment policy have to be used to pay off a mortgage, so it is safe to repay early?

dunstonh

No Pru policies are currently paying with shortfalls. If its an ex Scot Am (now Pru) policy, the 95% of those hit target in 2005 with 96% in 2006.

They are the strongest with profit endowments provider and its probably best to keep it running with only 7 years to go. Making it paid up will reduce terminal bonus and the guaranteed sum assured. Selling it will mean someone else benefits and not you and surrender is wasteful.

You could post some more info on it (i.e. it's current position, annual and terminal bonus, guaranteed sum assured, target amount and projections) if you want us to give a quick check.

Presumably there is no law that says that the proceeds of an endowment policy have to be used to pay off a mortgage, so it is safe to repay early?

You can use it for whatever purpose you like. Older plans tend to be assigned to a lender (often one from many years back) so usually its worth asking the insurance company if an assignment exists and ask them to remove it if it does. This usually involves them writing to the old lender or you getting a letter from the old lender to confirm they no longer need to be assigned. If you wait until maturity, it could hold up payment of the funds.

Addiscomber

I didn't notice that the OP's policy was with the Pru. Ours is with Eagle Star, which is now Zurich. It is one of the 'low cost' ones. How can we find out what sort of payouts are currently being made on similar policies?

wymondham

Addiscomber, we had a Eagle Star Low cost (now zurich) and were advised to cash it in which we have done (apparently all the investments are in the wrong funds or something like that??!). See if yours is any good by seeing if anyone wants to buy it - nobody was able to offer us anything, so we assumed it must be bad! good luck whatever you decide!

dunstonh

Zurich and Pru are on different planets when it comes to performance and future potential I'm afraid. Whilst the vast majority of Pru plans are likely to hit target, the reverse is likely to be the case with Zurich with profits endowments (unit linked could still hit target and surplus).

Addiscomber

wymondham - OMG:eek: :eek: :eek: I shall still thank you for the information though :rotfl:

dunstonh - Thanks. I suspected it wasn't likely to be good news because of the paltry bonuses that have been awarded.:mad:

barneys

With reference to dunstonh reply to my OP.

The current position of my Pru with Profits endowment is:
Target amount: £33,000
Guranteed sum assured: £16,760
Projected maturity value:
4% growth - £28,200
6% growth - £32,300
8% growth - £36,800

Any further comments will be appreciated

dunstonh

barney, we cant say what you will get but expectation and sensible projections would put the figure somewhere between the 6 & 8% with Pru. They are good on With Profits and paying about 6% if you include terminal bonus.

Coupled with the lower monthly costs endowment mortgages tend to have over repayment mortgages, you have come out of this quite lucky.

in 2005, all maturing Pru endowments paid a surplus. The average surplus was £2,200. In 2006,the final figures are not yet published but interim figures given say all were going to hit target and pay surplus with an average £3,300.

You have a strong endowment. Making it paid up will reduce the return. Surrendering it will incur charges and selling it means someone else benefits.

barneys

Thanks for your comments dunstonh, very iinteresting. I think that despite all the uncertainty of endowment based mortgages I seem to have come out reasonably well with the Pru. I'll now consider my options further but I think I'll carry on paying the premium and hopefully get a reasonable return in 7 years time.