Cash in endowment now or wait until maturity?

TheBlueVoice

Mortgage details:

Oustanding Balance: 63,000
Current rate: 3.5% (Halifax svr)
Remaining term: 15 years
Monthly payment: 608 (including 150 overpayment)
No charge for additional payments beyond 10% of mortgage balance.


Savings:

25,000 in ISA getting 2.75% until Jan 2013 (can move cash at any time without penalty)


Endowment details:

Current surrender value: 15,400
Monthly premium: 49.84
Matures: 04/2017
Estimated payout: 20,700 - 23,300 (depending on performance and Standard Life mep)


Should I cash in the endowment now and pay off a chunk of the mortgage and increase the mortgage overpayments by 49.84 ish?
I'll have to take out additional life insurance as required I presume.

Or should I wait until maturity in April 2017 and use it on the mortgage then?

Would switching to an offset mortgage in the meantime be a good idea?

2.75% on 25k (isa) savings versus say 3.75% on 25k mortgage (one account for example) would suggest not as only saving £42.5/year which would take ages to recoup fees etc.

Have I got the offset figures correct?

I would like to keep my savings as rainy day funds and fancy being mortgage free sooner rather than later.

I do have some large-ish purchases coming up shortly (I've allowed for in additional savings) like ring, marriage and possibly babies! Gulp.

What else needs to be considered?

Thanks!

sheslookinhot

TheBlueVoice wrote: »

Mortgage details:

Oustanding Balance: 63,000
Current rate: 3.5% (Halifax svr)
Remaining term: 15 years
Monthly payment: 608 (including 150 overpayment)
No charge for additional payments beyond 10% of mortgage balance.

Savings:

25,000 in ISA getting 2.75% until Jan 2013 (can move cash at any time without penalty)

Endowment details:

Current surrender value: 15,400
Monthly premium: 49.84
Matures: 04/2017
Estimated payout: 20,700 - 23,300 (depending on performance and Standard Life mep)

2.75% on 25k (isa) savings versus say 3.75% on 25k mortgage (one account for example) would suggest not as only saving £42.5/year which would take ages to recoup fees etc.

Have I got the offset figures correct?

I would like to keep my savings as rainy day funds and fancy being mortgage free sooner rather than later.Thanks!

Does the endowment have a terminal bonus ?

I would reduce savings by 10k, redue motgage balance but keep the mortgage payment the same and reduce the term to 8 years by my reckoning.

TheBlueVoice

Thanks She.

The figures were including any bonuses..

SailorSam

You normally get a final bonus when the policy matures so i'd let it run it's course.

holly_hobby

SailorSam wrote: »

You normally get a final bonus when the policy matures so i'd let it run it's course.

No this is incorrect advice - a terminal bonus is at the complete discretion of the provider, and wholly dependant upon the value of the WP fund at maturity, following provision for reversionary bonuses to current WP contracts, and further adjustments for operational requirements.

Indeed there are an increasing number of providers whom aren't paying a TB at all - but the OP won't know whether they will or won't recieve a TB until maturity is imminent i.e 2017.

So to maintain the policy for a further 6 yrs or so, solely on the possability of a TB would be folly.

The OP needs to look at the value of the MEP (which is subject to qualifying conditions noted below), the total sum of prems payable to maturity, and the cost of replacment life protection - compared to what the current EMVs indicate (which are of course subject to change depending upon the peformance of the underlying WP fund), and if it is financially worth continuing having considered the above.

It would normally be suggested instead of surrender to seek a policy sale through a Traded Endowment Co - but the bottom has now fallen out of this market.

OPs consideration to use the cash ISA as part of an offset arrangement would be a positive move, and means that the OP may retain the ISA and its tax advantags after mge redemption.(subject of course to Gov changes to the scheme).

I have no experience of Standard Life MEP (no doubt one of the forum IFAs or ex Standard Life Co Reps will be able to flesh it out), but I have linked their Std Life MEP guide for your ref (you will see the explanation of MEP is a little meaty, but in essence from what I understand the policy to qualify for MEP needs to have achieved a minimum 6% net annual growth throughout its term ) ... (sure Std Life will be able to advise on your current performance todate - anyway here's the link -http://www.standardlife.co.uk/1/site/uk/help/existing-customers/mep

Hope this helps

Holly

SailorSam

My endowment mortgage was with Standard Life and matured in Feb this year and i received a final bonus 'cos i let it run to the end date rather than cash it in.
Maybe not all polices are the same but the Op should check before he loses out.

holly_hobby

I am obv pleased that you were lucky enough to receive a Terminal bonus, but the fact remains that they are not guaranteed, with any provider - period.

Holly