my rubbish endownment

gitch01

i took out a mortgage in 1996 and took out an endownment for 44000.
it says its going to be somewhere around a £17,000 shortfall worst case.
i have tried to get compo through a reclaim company but as i did the endownment through the solicitor its all in black and white that i discussed repayment options. so i can't claim as the paperwork is pretty water tight. although i wasn't aware it could run in to figures like this amount.

so my query is should i cash it in now??

its worth somewhere over £8,200 if i do. then should i pay this £8,200 off the mortgage and change to a repayment for the rest of it.

or should i just carry on paying as normal and hope for the best. if there is a shortfall in 13 years time then i just take out a loan to pay it off

thanks for any replies

dunstonh

We cannot make any comment on it without knowing the details.

Seeing as projections are notoriously unreliable when used as the sole source of data we will need more than that.

EdInvestor

Posy some info

Provider
Guaranteed sum assured
Declared bonuses
Surrender value
Maturity date
maturity forecasts
monthly premium
Interest rate payable on mortgage

gitch01

sorry for slow reply, not been on line much

glastowinebar - your case sounds similar to me!

edinvestor - details as follows

the following figures are from june 2007 from my last statement.
i have a fixed rate mortgage of 5.49% until june 09


Provider FRIENDS PROVIDENT
Guaranteed sum assured £44,000
Declared bonuses £677.13
Surrender value £8200.83
Maturity date 30.05.2021
maturity forecasts 4% = 26700 / 5.5% = 31600 / 8% 41800
monthly premium £66.88
Interest rate payable on mortgage 5.49% until june 09

gitch01

i forgot to add that my actual mortgage amount is 42000.
i went for a bit more just to make sure i was going to get a little bonus.
oh well

gitch01

are these figures from last year ok for one of you guys to work out or should i try and get a more updated figure?

EdInvestor

gitch01 wrote: »

Surrender value £8200.83
maturity forecasts 4% = 26700 / 5.5% = 31600 / 8% 41800

You need to update these two for a proper calculation.

gitch01

thanks edinvestor, taken a bit of time but

updates are as follows

cash in value = £9475.68

4% = 27000

5.5% = 31700

8% = 41500

cash in value seems a lot better but the forecasts dont!

what do you think i should do next

thanks

EdInvestor

gitch01 wrote: »

4% = 27000
5.5% = 31700
8% = 41500

Hi. I

If you surrendered the policy, threw the lump sum at the loan to reduce it and increased the monthly repayments by the amount of the endowment premium to maturity, you would end up with 34,108.That's much better than FP's projection at the same rate of return.So I would bin this one, replacing the life cover beforehand if you need it.

Rather than swicth to repayment, suggest you overpay the existing I/O loan.Increasing the mortgage payment by the endowment premium will help, by reducing the interest payable. It may be worth your while upping the payment some more to meet the remaining shortfall - you really need to put the figures into a calculator after you've got the endowment sorted.

Overpaying an I/O mortgage can be cheaper than repayment and it certainly gives you much more flexibility in uncertain times - and given the fearful fees and charges the banks are now levying for any change, the more flexibility the better.:) .

gitch01

sorry for the time taken to reply but i have been told by my mortgage lender (brittania)
that i can't pay off a lump sum yet. i am in a five year fixed (5.49%) which runs until june 09. if i pay off a lump sum now i will have to pay 240 days interest. if i wait until june 09 when the fixed rate finishes i can pay off the £9,200 with no charges.

so should i keep my endownment going until next year or should i cash it in and put the £9200 into a high interest account.. I could also put the money that i pay monthly (£66.88) to the endowment into the high interest account as well i suppose.

any suggestions????

thanks

martinman3

As you are still waiting for an answer I thought that you should know that the growth in the endowment for the last year was, excluding last years premiums,
i.e. 9475.68 - (66.88 x 12 ) - 8200.83 = 472.29 which is 5.76% growth

If you could find an account paying this or higher fixed for 12 months then it may be a good idea.

Beware also that life companies could impose MVRs and restrictions on surrendering policies within the next 12 months if they wished which could upset your plans if stayed with the policy for another year and then wanted to surrender it.

If you do surrender, don't forget to get replacement life insurance, forgetting this could cost your family dear if the worst should happen.