Mortgage, cashing endownment or what??

Dear all,
I am in a situation and cannot decide please help.
I have an endowment insurance, current value £33K matures 2013 Nov at 50K or so. Have a Flexible mortgage of £30K at 6.5% and am paying £467 per month +£110 for the insurance premium.
My heart says cash in the endowment, pay off the mortgage which will save me about £7K per annum. On the other hand, £50K after 6 years will be a treasure to have holidays, health permitting as I am 60 now.

Can any one suggest any better options, changing the mortgage, insurance cover etc???



  • 17Dave17Dave Forumite
    158 Posts
    Hi Sebastian
    From the info you have given it would seem that paying off the mortgage seems like a good idea. You say £50k in 6 years would be nice (i.e. a profit of £20K if the mortgage is interest only) but if you pay the mortgage off and use all the savings you will have around £42k (plus interest) to spend - 6 years at £7k. At least you decide how much to pay each month!

    However, you may need to review your life cover, you may get more from your endowment if you sell it, you may need some investment advice!!

    A full financial review would probably be beneficial - choose a local IFA.
    Hope this helps
    Do post on the mortgage free board if you do pay it off.
    "The true measure of a man is how he treats someone who can do him no good."(Samuel Johnson 1709-1784)

    Lots of years in financial services, still learning!
  • hi sebastian ,
    just to say it seems a good situation to be in. in my personal view i would cash in sell up and be free , no more situation then . good luck whatever you decide .
  • I'd have a death grip on the endowment if I were you. You only have 6 years to go and will invest a total of £110 x 12 x 6 = £7920 and get a return of £50k - £33k = £17k and it's all tax free. You may also find that the return will be greater than 50k, which I'm assuming is a projection from the life company, because they never quote the terminal bonus (which is paid when an endowment matures) in their projections.

    I cashed in my endowment because it had 14 years to go and it had a shortfall, yours has 6 years to go and will have a huge surplus. Unless you are really really struggling for money, then you should keep it till it matures. Actually, even if you are struggling, you should try to keep it - you'll probably need the extra money when you retire than you do now.
    Mortgage Free in 3 Years (Apr 2007 / Currently / Δ Difference)
    [strike]● Interest Only Pt: £36,924.12 / £ - - - - 1.00 / Δ £36,923.12[/strike] - Paid off! Yay!! :)
    ● Home Extension: £48,468.07 / £44,435.42 / Δ £4032.65
    ● Repayment Part: £64,331.11 / £59,877.15 / Δ £4453.96
    Total Mortgage Debt: £149,723.30 / £104,313.57 / Δ £45,409.73
  • setmefree2setmefree2 Forumite
    9.1K Posts
    Mortgage-free Glee!

    I'd check on the mortgages & endowments board where you will get some advice from Edinvestor, Dunstonh, etc....but I suspect DD is right - this endowment sounds like one to keep as you are so close to the end....all the best:money:
  • As I see it, if you continue to pay your mortgage and endowment until 2013 it will cost you about 42,000. You will then get back about 50,000 from the endowment policy. That gives you 8,000 profit in 6 years' time.

    If you cash in and pay off your mortgage now you will be able to invest 7,000 a year which will be worth 42,000 plus (6 years') interest in 6 years time.

    Or am I missing something?
  • sebastianjsebastianj Forumite
    1K Posts
    Part of the Furniture 500 Posts Combo Breaker
    Thank you all for the response, Eamon seem to have struck the right chord,
    Eamon you are thinking exactly as I am, I changed my mortgage from endowment but kept it running for the insurance. Yes I will save £110 Insurance premium and £467 mortgage repayment every month. £7K a year gives me £42K.

    Projection at 6% is £53K, so the difference is £11K. I think £11K is a good price to pay for all the stress I am in. Some adviser suggested that I am entitled to Pension credit+ Council tax benefit and part of the interest can also be paid by the inland revenue. But if I use the cash or have any cash left then I may not be entitled to any thing.:confused:

    I am even more confused after his advice as I have never claimed any benefits etc.

    All things simple are never that simple.
  • dimbo61dimbo61 Forumite
    12.4K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    hi sebastianj
    difficult one this! if you cash in the endowment now and use the money to
    clear the mortgage your home will be paid for (MF at 60)
    BUT and this is a big but will this then affect your entitlement to
    pension credit and council tax benefits etc,
    have you got a good pension where you work ??
    can and do you want to retire at 60 or 65??
    you have the choice of what you do with the monthly
    mortgage + endowment payments if you clear the mortgage save into isa,s or spend
    the money on enjoying life !!!
    check the benefits available and any savings limits
    good luck the choice is yours
  • sebastianjsebastianj Forumite
    1K Posts
    Part of the Furniture 500 Posts Combo Breaker
    Hi all, many thanks for all your input.

    I am still no wiser though. I have a company pension of about £7.5k per annum. I still don't know if cashing in the endowment and using that money to pay off the mortgage will disadvantage me in the Pension credit, council tax and any thing else.

    Cashing in the endowment and paying off the mortgage will leave me with £12k cash, and I will be better of by £600 every month(part of the pension and benefits etc).

    Any expert view appreciated.
  • dunstonhdunstonh Forumite
    107.8K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Endowments are not included in the means test for pension credit. However, the minute one matures or you surrender it, it is included.

    It is also worth noting that many endowment providers are understating the maturity values by not including mortgage promise values (Norwich Union and Standard Life for example) and are not including the final bonus that has accrued to date. I have seen examples where the projections are actually lower than the current value and where the maturity projection in the final year has been £15,000 lower than the final maturity itself. Some unit linked endowments are averaging 10% a year long term but only project at 4,6 & 8%. This can often lead to endowments heading for a surplus actually showing a potential shortfall.

    There are also some pretty poor examples out there where the projections could be overstating the likely return.

    So, unless some information is actually known about the policy, it is impossible to give you an idea of what you should do.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestorEdInvestor
    15.7K Posts
    sebastianj wrote: »
    I have an endowment insurance, current value £33K matures 2013 Nov at 50K or so. Have a Flexible mortgage of £30K at 6.5% and am paying £467 per month +£110 for the insurance premium.
    My heart says cash in the endowment, pay off the mortgage which will save me about £7K per annum.

    Hi Sebastianj

    Could you post the following:

    Provider's name
    Surrender value
    Maturity forecasts

    A review will then follow :)
    Trying to keep it simple...;)
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