Man this board gets you thinking :)

Aliktren

So here's a question, Many years ago, when a decent house was "only" 65k we took out our first mortgage as an endowment with Allied Dunbar.

So we've had it for like 12 years, so it's getting on the midway point, I havent had a valuation for it

We switched to a repayment some time ago, so we#ve kpet it on, it has a pretty decent critical illness and term assurance policy attached.

I dont think we have any allusions about being mortgage free any time soon, but we are starting to get interested in getting that big ol sum down (we're starting a mortgage pig this weekend )

Whats a better approach do you reckon, get out of the underperforming endowment and use the proceeds to downsize the mortgage, keep the endowment as a nestegg, or keep the endowment and in ten years use it to pay back a fair chunk of our existing mortgage??

Ta

A.

Kaz2904

From what has been said on here recently I don't know how sellable endowments are. You need to go into it to find out how much it's worth.
The thing to remember is that any overpayment helps.

jessicamb

If you value the critical illness and term assurance cover with the policy then look at what these would cost to replace.

I would expect that the policies would become more expensive to take out now as you are older.

Martinslovechild

Like you, I had 2 under-performing endowments back in the early 2000's. I had been becoming increasingly frustrated with their lack of transparency, i.e. they didn't seem to appreciate during good stock market years and bonuses equalled either nil or next to nothing during the bad years, so I was in a lose-lose situation.

In fact, one of the endowments performed so badly that I pursued a mis-sale claim which was found in my favour. That's because when I began my original mortgage, it was on an interest-only basis (with the endowment running alongside to supposedly pay it off 25 years later); however, because of my disillusion with the endowments and my focus to pay my mortgage off, I switched the mortgage from interest-only to repayment in 2001. It was because of this that the mis-sale claim was found in my favour, i.e. they decided that I should have probably been put on a repayment basis right from the start but the Financial Adviser had over-egged the 'benefits' of endowments, even suggesting that they would likely reach their target earlier than 25 years leaving me with a surplus amount.

It really is a personal decision, but for me the transparency of a repayment mortgage was liberating. I knew exactly how much I owed at any point in time and there was no room for the vagueness of endowment valuations, Market Value Adjustments (MVA's) and red-letters.

I made both policies 'paid-up', i.e. I didn't pay any further amounts into them, but the policies remained in force. I would have sold them at this point had it not been for the extraordinary high amounts of MVA's I would have needed to forego to collect my payments. I decided instead to wait until the stock markets picked up and the MVA's reduced - this took about 12 months during which time the MVA on one policy reduced from £850 to about £100 and the underlying investment had also increased slightly.

I then sold both endowments and threw this amount at my mortgage. For me, I don't regret selling the endowments - in fact, the opposite is true - I felt truly happy that they were gone for good. And, like yourself, this event occurred at the same time as I was starting to look at my mortgage much more holistically. I was on a mission...