Endowment Shortfall:how best to use my savings ?

EdInvestor

snapyou wrote: »

EdInvestor wrote: »

Interest rate payable on mortgage : SVR

Can you give the actual rate?Each lender's SVR is different.

snapyou

EdInvestor wrote: »

snapyou wrote: »

Can you give the actual rate?Each lender's SVR is different.

My current rate is 7.75%


Thanks again for taking your time to help me out.

EdInvestor

snapyou wrote: »

EdInvestor wrote: »

Hi snapyou.

Very likely you should surrender this endowment and use the money to reduce your mortgage, also increasing the mortgage payments by the endowment premium.

maturity projections @ 3.5%=16,000
@ 5% = 17,200

If you surrendered this policy and proceeded as above, your return at maturity would be 19,103 guaranteed (assuming the SVR remained the same).

This is several thousand pounds more than Phoenix's top projection, which they are very unlikely to meet: this is a zombie policy which is pretty unlikely to attract any terminal bonus - you could end up with only the guaranteed value ( currently 14k) plus whatever pathetic bonuses they add on in the next 4 years - you have seen how low they are.

So I suggest you get rid of it pronto.(Replace the life cover if you need it before you surrender).

You are still going to have a shortfall of around 7k on this basis.There are several ways to tackle this:

- as well as increasing your mortgage payment by the endowment premium, increase it a bit more so that you are overpaying at a faster rate.Don't reduce this payment when interest rates come down, as this will increase the overpayment, which will be helpful.

- use some of your savings to overpay as well (but don't leave yourself without an emergency fund).

-extend the mortgage term a bit so you can pay it off over a longer period.But you will find it starts coming down at a good clip once you have cut it in half with the lump sum, so you can probably make a decision about this one later, when you see how the account looks as it nears maturity.

snapyou

EdInvestor wrote: »

snapyou wrote: »

If you surrendered this policy and proceeded as above, your return at maturity would be 19,103 guaranteed (assuming the SVR remained the same).

.

THANKS SO MUCH AGAIN. I'm not too sure how you got to this amount?
If i cashed in my endowment and put into my mortgage,how would it be £19,103 ?
thanks again

I spoke to Phoenix today and they said I could espect a terminal bonus of 33%

EdInvestor

snapyou wrote: »

EdInvestor wrote: »

THANKS SO MUCH AGAIN. I'm not too sure how you got to this amount?
If i cashed in my endowment and put into my mortgage,how would it be £19,103 ?

It's compunded interest over the period.You have to pay in the endowment premium to the mortgage as well.

I spoke to Phoenix today and they said I could espect a terminal bonus of 33%

Presumably this is included in the projections.

snapyou

I'm still confused as to this 19,103?

Do you mean if i cashed in the endowments and paid them into the Mortgage,that I would be £19,103 better off rather than the Endowment's Projected Amounts of between 16-17,200?

EdInvestor

snapyou wrote: »

I'm still confused as to this 19,103?

Do you mean if i cashed in the endowments and paid them into the Mortgage,that I would be £19,103 better off rather than the Endowment's Projected Amounts of between 16-17,200?

No I mean that if you cashed in and paid the money into the mortgage, the return would be 19,103.This is compared with the projected return of 16-17k on the endowment.So you would be 2-3k better off - and you would have no stockmarket risk.

Every little helps

snapyou

EdInvestor wrote: »

No I mean that if you cashed in and paid the money into the mortgage, the return would be 19,103.This is compared with the projected return of 16-17k on the endowment.So you would be 2-3k better off - and you would have no stockmarket risk.

Every little helps

Do you mean that cashing in my endowment which has a surrender value of £ 12, 840 and putting it into my mortgage asap would end up saving/making me £19,103 rather than POSSIBLY receiving the projected target amounts?

Sorry,to be a pain,but I'm still confused by this "the return would be 19,103."

Once again,thanks for being so patient and helpful.If you ever need Photography tips,i'm your man..but finances:oh no!

EdInvestor

snapyou wrote: »

Do you mean that cashing in my endowment which has a surrender value of £ 12, 840 and putting it into my mortgage asap would end up saving/making me £19,103 rather than POSSIBLY receiving the projected target amounts?

You got it. You have to pay in the endowment premiums as well as the S/V, ( ie by amalgamating the mortgage payment and the endowment premium into one larger mortgage payment).

snapyou

EdInvestor wrote: »

You got it. You have to pay in the endowment premiums as well as the S/V, ( ie by amalgamating the mortgage payment and the endowment premium into one larger mortgage payment).

Hoorah! I understand now.I feel like I've had a week's intensive course on Endowments/Mortgages !

Thanks so much for your advice:a real life saver!

:T