What Went Wrong With Endowments And What Can You Do About Your Mortgage?

Endowments are a dirty word amongst most homeowners! If you bought your home in the 80's or early 90's you probably took out an endowment policy as a way to repay the balance after 25 years. At the time, interest rates were in double figures and returns on most investments (including endowments) were spectacular, so an investment product that needed to make returns in excess of 10% a year in order to hit its target did not seem unreasonable.

Then interest rates (and investments returns) started to tumble and with that came the reality that many endowments would not hit their original target, leaving homeowners needing to find extra cash to repay their mortgages. With hindsight, with-profit endowments are simply the wrong option for saving towards a fixed target on a fixed date.

If you are concerned about your mortgage repayment, you can gain total peace of mind by switching to a repayment mortgage. Switching an existing mortgage while keeping your original endowment will mean increased monthly payments though, as each month, part of your loan will be repaid as well as the interest. One option to reduce costs would be to switch just part of your mortgage to a repayment whilst using the proceeds of your endowment when it matures to repay the rest.

Another option is to pay a lump sum off the loan at the time of switching. If cash isn't readily available for this then you might consider selling your endowment policy and paying the proceeds of the sale into your mortgage.

When you take away the need to hit a fixed target, with-profit endowment policies are actually low risk investments with a strong performance record and so there are plenty of investors who want to buy them and will pay more than the surrender value.

Then, to find out how much you could sell your endowment policy for, you can contact an endowment buyer - also called a market maker - who will give you a free quote to buy your policy, but before you do this you should consider your options.

If you do have the money to pay the fees, never forget that getting the opinion of an independent financial advisor is often a good plan; sometimes getting the opinion of more than one can prove to be even more of an advantage and can provide the sort of knowledge and expertise that could really help you to sell your endowments at the right price. The research and work could be done on your own, but many find it far less stressful and often a lot safer to seek the advice of professionals.

The most important thing to remember is that one has to think very carefully before taking action with their investments - take the time to research and consider everything before selling your endowment policy.