Endowment selling to pay of parents debt

kgall

[FONT=&quot]Hi,

I have posted elsewhere on here about the problems my parents are having with debt. In short they have debt, and a mortgage shortfall that their endowments will not cover (two).

I have looked at the situation and think the best way may be for them to cash in the endowments (or maybe just the largest) and repay the debt - and then save like mad!

The problem is I don't have the first idea about endowments so grateful if anybody could give some advice as to whether this is a crazy idea or not and if it does make sense how they should go about selling/cashing it in.

Thanks, K.[/FONT]
[FONT=&quot]Both are with Standard Life, 1. Home Plan 2. Early Maturity Plan

What is the value of both endowments?[/FONT][FONT=&quot]
1. £20,000 2. £55,000

How much would they give if redeemed today?
Plan Value (The total value is what you'd get if you cashed in your plan on 1st Feb 2012)
Total value on 1st Feb 2012 Total value on 1st Feb 2011 Amount paid on death1st Feb 2012)
1. £8,712.67 £8,282.53 £20,000.00
2. £24,126.65 £22,600.75 £55,000.00

What is the projection of the value? (min/max figures)
1. Lower rates mid rates higher rates target amount.
£11,700.00 £13,000.00 £14,400.00 £20,000.00

If investment grows at:-
2. 3.75%a yr 5.50% a year 7.25% a year target amount
£30,000.00 £32,400.00 £35,000.00 £55,000.00

What is the bonus and when do they get it?
1.
Total value (what is given if plan is cashed in on 1st Feb 2012)
Total fund value £8,031.60
Total Fund Value £ 681.07
Total value on 1 Feb 2012 £8,712.67

2.
Current Value £21,667.40
Final Bonus £ 2,459.25
Total current value on 1 Feb 2012 £24,126.65


When do they mature?
1.Plan started 28 Aug 1994: Plan matures 28 Aug 2017
2.Plan started 5 Nov 1987: Plan matures 5 Nov 2016

How much are they paying every month?
1.£55.60
2.£64.25[/FONT]

DVardysShadow

Other thread https://forums.moneysavingexpert.com/discussion/4018297 for background.

DVardysShadow

If they have debt accruing interest at 34%, no endowment policy is going to match that. First steps are to follow through with DFW and work on getting the interest reduced on all their debt by whatever means. And then look at the highest interest rates on top £8,000 and £20,000 of their debt to compare with the return on an endowment.

Be very aware that if they are naive enough to get into this sort of a fix, debt may be endemic to them and the first thing they may do is get back into it, despite your efforts.

Thrugelmir

Surrender the policies and clear the debt owed. Use the remainder to pay down the mortgage.

Then budget for them to repay as much off the mortgage on a monthly basis as they can reasonably afford.

With around a year left on the mortgage approach the lender to see what options are available to extend the mortgage term. This will depend on your parents ages .

kgall

Thanks all. The mortgage has about 5 years remaining and the tie in period ends in December this year.

It is possible that just largest endowment will cover the whole debt. Should they still redeem both and use to pay off the mortgage?

Also, I understand they can both redeem and sell the endowments, which is the best route and how do they do this?

Thanks, K.

opinions4u

Check with Standard Life for the current value of any Mortgage Promise that would be lost on surrender or sale.

I don't think there is much life left in the second hand endowment market.

DVardysShadow

opinions4u wrote: »

Check with Standard Life for the current value of any Mortgage Promise that would be lost on surrender or sale.

Agreed. But then use this do the calcs to establish the annualised rate of return. Even if OP's parents can move all their debt away from their highest APR, I doubt that any mortgage promise would make any difference.