How much would it cost ?

gadjah543

I am looking at redeeming our endowment. It is a standard life unit endowment with a mortgage promise of about 3k when it matures in 2019. I am paying £165 per month for the joint policy which gives us 65k of life insurance although we do have other life cover through pension and a seperate life insurance co.It is currently on target to clear 49k if the top figure is achieved but obviously nowhere near the figure we originally hoped for.

Our mortgage is 80k with 49k on interest only.House is worth 300k .The endowment is currently worth 27k.We would like to use 7k on home improvements .If we paid the remaining 20k that the endowment would release and then added the £165 per month towards the mortgage how far away would we be from clearing the mortgage in 2019 ? Currently we are with Nationwide on their 2.5% deal where I can make overpayments. If anyone can work the figures out for me or point me in the direction of a website that would do this I would be grateful.Thanks.

opinions4u

You'll lose the benefits of the mortgage promise on the policy.

HappyMJ

It's almost never worth redeeming an endowment policy before it's maturity date. You have 8 years to go at £165 a month costing nearly £16k in total but the increase in the value of the policy will go from £27k to £49k. A £22k increase and you get life cover as well. I'd leave it. I also would not make overpayments. You are on a very low interest rate. You can save at a higher interest rate to the one you are paying so can earn more than you would save.

If you need £7k for home improvements then save for them and pay for them out of your savings.

A £29k mortgage over 8 years would increase your payment from £60 interest only to £335 a month repayment. As well as the £165 you will be adding you will need to pay an extra £110 a month to clear it on time. If you were to just extend the mortgage by £7k then it would only cost you an extra £80 a month.

gadjah543

Thanks for the replies. If I did ask for a further 7k from the Nationwide would I not lose the rate that I am on.This is what was stopping me do this in the first place. We need the work done quickly, we have tried to save and have some put aside but the electrics in the house are getting so old that it is becoming an accident waiting to happen.