Should I cash in my Endowment & pay mortgage

lobster123

Hi,

I have a £32,000 Interest only mortgage (25 year term) with 9 years to go. Standard Life have advised me that I will probably have a shortfall - the low rate estimate is £18,090 and the highest is £24,680. Did I read somewhere that Standard Life would guarantee to pay the full amount to old customers or is this just wishful thinking on my part!

Would I be better off cashing in the endowment (valued at £10,000 approx) and getting a repayment mortgage for £22,000. Or even get a bank loan to pay the mortgage off in full. I can get a rate of 6.2% just now.

Who is the best company to sell the endowment to? Standard Life or someone else.

Many thanks in advance.

dunstonh

Standard Life have advised me that I will probably have a shortfall

Really? Standard Life dont give advice.

the low rate estimate is £18,090 and the highest is £24,680. Did I read somewhere that Standard Life would guarantee to pay the full amount to old customers or is this just wishful thinking on my part!

Did those projections include the final bonus accrued to date. They wont include any mortgage promise value you may have.

The mortgage promise value was dependent on your shortfall back in 2001 (IIRC). It doesnt guarantee full repayment as shortfalls continued to increase for a while on projections and standard life stopped increasing it but capped it. As shortfalls have been going down again, the mortgage promise value can make the difference and in some cases can be worth a lot of money.

Would I be better off cashing in the endowment (valued at £10,000 approx) and getting a repayment mortgage for £22,000. Or even get a bank loan to pay the mortgage off in full. I can get a rate of 6.2% just now.

I did a review of a standard life endowment a few weeks back and it was growing at an average of 7.1% p.a. which beats your 6.2% on the mortgage. Plus it includes life cover and possibly CI cover which you would have to arrange to replace the surrendered endowment. The endowment I reviewed was above the target growth rate and on track for a surplus. However, the projections issued showed a shortfall due to the limitations of what is and isnt included in the projection and the rate used.

We would need to know the following to give any indication of what is best:
1 - your SL mortgage promise values
2 - your final bonus value and if it is included in the projections or not (this is best in writing as the telephone side seem to say it is but when you get it in writing, it isnt).
3 - cost of replacement life cover.
4 - actual surrender value
5 - guaranteed sum assured
6 - annual bonuses to date.
7 - monthly premium
8 - monthly cost of your repayment mortgage if you went down that route
9 - monthly cost currently of your interest only mortgage.

EdInvestor

dunstonh wrote: »

4 - actual surrender value
5 - guaranteed sum assured
6 - annual bonuses to date.
7 - monthly premium

This is the key info required plus the interest rate payable on your present mortgage.Mortgage promise amount (if any) is also helpful.

You can seek quotes to sell it here:

www.appm.org

They will want the same info.

dunstonh

Mortgage promise amount (if any) is also helpful.

Its not helpful. It is necessary. Without knowing if you are going to get £5000 added on maturity or not you cannot make an informed decision.

Your "key" information required is insufficient to make a correct decision.

EdInvestor

Not many people have a mortgage promise and it's often not very much money, not enough to make it worth keeping the endowment at current interest rates.

Worth checking though.

dunstonh

Not many people have a mortgage promise and it's often not very much money

Quite a lot of people have the mortgage promise and the typical amounts are between £2,000-£10,000.

Obviously, its up to the individual whether they decide to make a decision without knowing the facts but seeing as SL will put everything you need in one letter to you, there seems little reason not to wait the 5 days it takes to get that info in writing.