What would you do in my situation? 21 May 2014 at 6:08PM in Mortgage-free wannabe 9 replies 1.1K views

geri1965_2

Please be gentle with me, I've never been in this forum before!

I have approx. £27,000 left on my mortgage. I have an endowment which has about £19,000 in it although it is not due to mature for a few years.

I could cash in the endowment and use it to pay off part of the mortgage, and pay the balance off with my savings. I would have about £10K of savings left if I did this.

I don't know if this is a good idea or not. I like the idea of not having a mortgage, but I don't know if it makes better financial sense to leave the endowment until it matures.

Can anyone advise?

black_taxi_2

keep endowment going as it's only a few years,nice nest egg

edinburgher

How is the endowment performing (i.e. what's the rate of growth vs. the mortgage rate)?

geri1965_2

edinburgher wrote: »

How is the endowment performing (i.e. what's the rate of growth vs. the mortgage rate)?

I don't know

I had loads of red letters in the early days, which is why I changed my mortgage to repayment and just kept the endowment as a savings plan.

Goldiegirl

My endowment policies finished a few years ago, but from memory, you get annual bonuses calculated as a percentage of the basic sum assured, and a terminal bonus based on a percentage of all the bonuses earned.

They should send an annual statement giving the amount of bonus earned and the rate. You could ask them of the rate of terminal bonus currently being paid, to get an idea of what the are paying for this type of bonus.

If there's a terminal bonus, I think I'd keep the policy going until the end, keep my savings in case I needed the draw on them for any reason, and make overpayments to the mortgage to reduce it quicker

geri1965_2

I've never had a bonus with it.

in_need_of_direction

The bonus goes towards the pot value. You don't actually receive it.

kkgree1

Please check what kind of endowment you have as I have a units based endowment, rather than the with profits endowment which are regularly mentioned on here. They are completely different and my units based endowment has a bonus in the final year only (not each year). I've decided to keep mine going just as an investment and will see what I get in 2025!

geri1965_2

I phoned them and she said there was no terminal bonus, but they tend to perform better in the last 5 years.

No idea if that is bull-youknow what or not, anyway, she is sending me some 'projections'. I am inclined to keep it now as there is only 7 years or so to go.

in_need_of_direction

What's the interest rate on your mortgage compared with what you get on your savings? Also, what type of home do you have? My house was built in 1916 so we always need access to funds to fix the bits that fall apart.