Any reason why surrendering endowment a bad idea ?

droodleskins

I have been paying into a small unit endowment for 16 years now and currently its surrender value is £16k. It was taken out to pay off a mortgage many years ago and was supposed to reach 42k but looks like it will only make £24k at maturity

We are currently selling our flat and buying another before moving overseas. My idea was to surrender this as some of the money would be useful and add the rest to the deposit on the new house. As the new house will have a repayment mortgage about 50/50 then i can't see any other reason to keep it going (other then it would be a nice sum when it matures)

Any reasons i can't think of why this is a bad idea ?

thanks.

Let_Us_See

droodleskins wrote: »

Any reasons i can't think of why this is a bad idea ?

thanks.

Which idea are you referring to? Keeping the endoment to support your 50/50 split mortgage or surrendering?

comeandgo

Your endowment policy will also pay out the full amount on death so it is life insurance, the one I have will also pay the premiums if I'm ill for a certain time. Can you get/do you need the life policy if you cash in this one? Also, can I suggest you look at the second hand market for endowment policies. A friend of mine got a few thousand more on the second hand market.

droodleskins

Hi thanks for the reply - i looked into selling - as its not "with profits" i haven't found one interested.

With regards the the life assurance - this was taken out when i was a singleton . .since i got married and had kids we have a separate life assurance which should cover most things.

droodleskins

Let_Us_See wrote: »

Which idea are you referring to? Keeping the endoment to support your 50/50 split mortgage or surrendering?

Neither - just if theres anything i haven't thought of by surrendering the endowment.
I intend to add the majority of the surrendered endowment to the deposit making repayment less and we should also be in a position to make regular over payments as well.

McKneff

Don't forget you have life insurance built into this endowment policy.

Cash it in and you would probably have to take life insurance to cover your mortgage etc.

You should consider this in the equasion.

TrickyDicky101

Are you certain you can get a mortgage with an interest only element wihout an endowment (or some other repayment vehicle) in place?

droodleskins

TrickyDicky101 wrote: »

Are you certain you can get a mortgage with an interest only element wihout an endowment (or some other repayment vehicle) in place?

As i put in the initial post .. new mortgage will be repayment (maybe offset)

Let_Us_See

droodleskins wrote: »

As the new house will have a repayment mortgage about 50/50 then i can't see any other reason to keep it going (other then it would be a nice sum when it matures)

The assumption is this will be a 50/50 split mortgage. I take it you really meant a 50% LTV?

holly_hobby

You need to consider if the policy has any additional benefits that will be lost on surrender, which in addition to the straight life cover, may be benefits such as critical illness, terminal illness or indeed a mortgage endowment promise.

Selling wise, only with profits are traded, surrender wise, you won't lose out any terminal bonus as they only apply to with profits plans.

The value of your plan, as its unit linked, will vary, with the pch and addition of further units (via your premiums), and underyling value of the units on any given day.

As noted by Tricky, bear in mind that you won't obtain a further IO (full or in part) without a repayment vehicle, but seeing as you intend to go full C&I, we can set that point aside.

Just check out any loss of benefits you may not be aware of such as the MEP, before you make your final decision.

Hope this helps

Holly