What should i do with my Endownment?

stulaunch

I have Pru (Scot Amic) endownment which will leave me with a shortfall on maturity.

Yesterday i asked for surrender value and projected values, as i want to work out my best option to deal with shortfall.

If i post all details, i was hoping that somebody could give me an opinion on whats my best course of action.

My balance on mortgage is £18,123 with 28 months left.

Interest rate of 1.250%.
With monthly payments of £20 but i'm paying £100

Current position of Endownment as of yesterday 29th March;

Surrender value £12,151
Pojections 4% £13,700
6% £14,300
8% £14,900
Monthly premium £25

I know Scot Am have quite a good track record, but even at 6% it will be nearly £4000 short.

I know its only a small mortgage but i'm not a high earner and want to get as close as possible at end of term to cover mortgage.

It would be possible to pay a little bit more monthly now my payments are quite low.

easy

ah but you are overlooking the fact that you are overpaying each month. If you do that for the next 28 months you will take almost £2500 (approx) off the final settlement figure.

so, to take a conservative view :-

Balance £18123 minus £2500 (your overpayments) = £15723 minus £13700 (worst case projection) = £ 2023 shortfall.

You could eat into that with additional monthly over-payments now. If your endowment does reach the 6% figure of £14300, that shortfall would be £1423, so an additional £50 per month now would just about cover it..

If you can't afford £50 per month, you could either overpay as much as you can afford to reduce the shortfall, OR save what you can each month, and everytime it amounts to £100 buy premium bonds. Over the next two years they could win you enough to cover the difference, if they don't you would still have the money to put towards paying it off. - I wouldn't necessarily suggest them as a longterm investment, but over the 28 months you might be lucky.

stulaunch

easy wrote: »

ah but you are overlooking the fact that you are overpaying each month. If you do that for the next 28 months you will take almost £2500 (approx) off the final settlement figure.

so, to take a conservative view :-

Balance £18123 minus £2500 (your overpayments) = £15723 minus £13700 (worst case projection) = £ 2023 shortfall.

You could eat into that with additional monthly over-payments now. If your endowment does reach the 6% figure of £14300, that shortfall would be £1423, so an additional £50 per month now would just about cover it..

If you can't afford £50 per month, you could either overpay as much as you can afford to reduce the shortfall, OR save what you can each month, and everytime it amounts to £100 buy premium bonds. Over the next two years they could win you enough to cover the difference, if they don't you would still have the money to put towards paying it off. - I wouldn't necessarily suggest them as a longterm investment, but over the 28 months you might be lucky.

Thanks for that easy, will look into that.

What about the endownment? wouldyou think i'm better off letting it run the distance?

easy

I can't see any advantage in cashing in the endowment at this stage - but I'm not an expert.