stick or cash in endowment

glitzy

Hi you clever people out there.

i have a zurich endowment, not sure if i should cash in or stick with it, £30,000 is against part of a mortgage, so i would have to find an alternative to cover that.

provider zurich
guaranteed sum assured £37,050
declared bonuses £13,336.52
surrender value £9800.76
monthly premium £40.65
maturity date 26.07.2016
maturity forecasts 3% - £16,500 3.75% - £17,600 5% - £19,400
interest rate on mortgage 5.29%

i would have a shortfall of £11,000 approx, but if i cashed in & paid off debts & an extra £100 a mth into my mortgage for the next 3 yrs would i be better off? my soa is on dfw forum - any advice is welcome plus is zurich a good company? cheers

EdInvestor

glitzy wrote: »

maturity forecasts 3% - £16,500 3.75% - £17,600 5% - £19,400

If you surrendered it and used the lump sum to pay off the mortgage also paying the premium in monthly to boost the mortgage payment your return at maturity would be 19686, which beats their highest projection and involves no risk.

If you use the money to pay down other debt at a higher interest rate you would need to divert money now being used to service that debt to overpaying the mortgage. This method would probably mean better savings.

Looking at your SOA, it would seem best to me to tackle the debt, by using all the lump endowment sum to pay it off. Your freedup mortgage premium could be added to the monthly payment to tackle the rest which would then go down very rapidly.

As far as the mortgage goes, this effectively means you will be on interest only until the debt is cleared, but that wouldn;t be for long. After that I would start overpaying the mortgage with as much of the freed-up debt servicing money as you can afford.