Missing Jigsaw Piece -Mortgages v Endowment v Home loans

[johnflan]

I just cannot get my head 'round this. Maybe someone can explain this to me.
Whats worse is I've been given conflicing advise on this.

I took out an endowment mortgage in 90’s and have 8 years left on it.
The mortgage is €36k.
The cash in value today is €26k
Thus if I cash in today I have a shortfall of €10k.

I currently repay €254 per mth (made up of €125 Life Assurance & €129 interest).
Estimated Maturity value at assumed growth rate of 4.8% is €47k and estimated maturity value at 6.4% is €52k. – so lets assume that when it matures I get a bonus of €11k (€47k-36k) -

If I continue to repay €254 per mth for remaining life of mortgage then I will repay €24k (€254 x12x8) – assuming rates don’t change.

If I was to cash in the policy now I would have a shortfall of €10k. If I was to borrow this €10k on a top up loan for house renovations then I would pay back say €11k/€12k over 8 years.

So I can invest €24k over next 8 years in the policy and get a bonus of €11k at the end of the life of the policy and be €13k out of pocket... or..... I can cash in the policy today and borrow €10k to pay off the policy NOW and pay back €11k/12k on the €10k borrowed over next 8 years.

Am I missing a piece of the jigsaw here?

 

[ClubMan]

Probably not. Many endowment policies linked to mortgages are nowadays proving not to have performance to the (often ambitious) targets initially set so are giving rise to a shortfall leaving the borrower with the option of increasing payments to cover this or replacing the outstanding loan with an annuity mortgage. If you decide to do the latter then be careful to get good advice on the best strategy for dealing with the endowment policy (e.g. cashing it in, selling it on or keeping it up until maturity).

 

[johnnybegood]

Hi, i recently was in the exact same position wiht my father, Basically he had an endowment mortgage that was not working for him. He might as well have been putting the money under his mattress.

Best solution and the figures support this is to get on to an annuity mortgage and make your money work for you. I ended up saving my father thousands plus you are no longer worried abiut the "performance" more like nightmare of the endowment policy.

Most useless products ever.... back in the day when interest rates were high they may have been good for certain people but in todays climate its better to cash it in, get a straight forward annuity mortgage and clear off the mortgage without having to worry about how much you owe in ten years.

Its amazing the amount of interest you will save on the mortgage amount itself.