Endowment matured for Interest only mortgage

mamaG

We took out an Interest only mortgage in early 1992 and also a bonus builder endowmet policy to cover this. We received a letter recently telling us that the endowment had matured and that we could cash it in or leave it in the deposit fund, however there is a possibility we may get less by the end date of March 2017 than at presesnt... Could anyone offer any advice as to what to do next?

Thrugelmir

What rate of interest are you paying on the mortgage?

fewcloudy

I don't think I understand enough about this to vote in your poll.

I thought when an endowment policy has matured, that means it has reached the end of its term and now pays out? So how could it be cashed in early?

fc

dunstonh

I thought when an endowment policy has matured, that means it has reached the end of it's term and now pays out? So how can you ask if it should be cashed in early?

That is correct. as it has hit maturity, it cannot now be surrendered (cash in).

Some providers have a deposit account option on their list of maturity options. Usually not very good but the OP hasnt mentioned the rate. It is no different to having the endowment mature in to a nationwide b/soc savings account, Lloyds bank savings account or whoever. It ceases to be an endowment and becomes a savings account.

mamaG

As far as I know it's the bank basic mortgage rate.

mamaG

Hi I possibly didn't make myself clear. The letter stated that the endowment had reached it9's maturity value early and that we could choose to pay the mortgage off now or allow
the the endowment to remain in their deposit fund, however I now understand that the rate of that deposit account could drop. We now feel that possibly taking the money now and paying off mortgage would be best as we have been told leaving it where it is may mean the value of the deposit dropping. Our maturity date was originally due to be early March.

AnotherJoe

dunstonh wrote: »

That is correct. as it has hit maturity, it cannot now be surrendered (cash in).

Some providers have a deposit account option on their list of maturity options. Usually not very good but the OP hasnt mentioned the rate. It is no different to having the endowment mature in to a nationwide b/soc savings account, Lloyds bank savings account or whoever. It ceases to be an endowment and becomes a savings account.

But how would that fit with with the OPs statement that it might be worth less in March 2017 than now?

OP, do you mean it matures in March 2017? You said it "had matured". Are you sure the letter isnt saying it will mature?

mamaG

Letter says that our plan had reached the target amount in August, and that we could now cash in however we could leave it til the maturity date, but have bedn warned we may end up getting less back than the maturity value. If we continue the plan the value isn't guaranteec and may in future be less than the current value. They also mention that the rate of return on the deposit fund (where our premiums would go) has been less than the annual management charge.

exiled_red

I'm not sure I reall understand the details, but I assume you took this product out to pay off the mortgage when its value reached the amount you owed on the mortgage. If it is as simple as it sounds, as you have now reached this point I would payoff the mortgage. The other to consider though are if there are any additional fees that you might face for paying off the mortgage now, you should consider these when making your decision.

AnotherJoe

mamaG wrote: »

Hi I possibly didn't make myself clear. The letter stated that the endowment had reached it's maturity value early and that we could choose to pay the mortgage off now or allow the endowment to remain in their deposit fund, however I now understand that the rate of that deposit account could drop.

I suspect you've misunderstood that also. The only way it would drop is if it remained invested until the maturity date, when a stock market dip between now and then could make it decrease. Putting it in a deposit account now wont make it fall it will just stay as is with a derisory interest rate.

We now feel that possibly taking the money now and paying off mortgage would be best as we have been told leaving it where it is may mean the value of the deposit dropping. Our maturity date was originally due to be early March.

Ah so it hasn't matured then, its just reached the value you were aiming for,and by the sound of it, there's no terminal bonus, so no other benefit in letting it run to maturity.

So its a simple question of "do you feel lucky, punk?". Plus I suppose, "could you get a new mortgage for the outstanding amount of lets say 10-20% should there be a stock market fall between now and March 2017?"

In your case I'd advise cashing it in.

tacpot12

I'd recommend you cash it in now, clear the mortgage, and continue to pay the amount of the mortgage interest and endowment premium into a regular savings account or ISA. I think this option gives you more control.