What should I do with my endowment?

If you have an endowment mortgage, chances are the endowment policy the stock market investment part of the package hasn't performed nearly as well as you expected.

Back in the 80s and 90s, when most of these interest-only mortgages were taken out, holders were led to believe they would be a reliable, low-cost way to clear their capital debt (ie the original amount borrowed).

In fact, poor investment returns mean the UK's eight million or so endowment holders face an average shortfall of just over £7,000.

(For more on this, read What went wrong with endowment mortgages?)

The question now is what to do with the policy.

The options

• Increase your payments

Unsurprisingly, this is likely to be the course of action recommended by your policy provider.

However, it could be argued that you'd simply be throwing good money after bad.

No one knows what will happen to the stock market over the next few years and if it performs poorly you still might not have enough cash to clear your debt.

• Cash it in

You could simply stop your endowment payments and take whatever cash-in value your provider is offering.

However, because of the way it calculates this (often involving a complicated thing called a market value adjustment or MVA) it probably won't be nearly as much as you'd like.

As a result, you might be better off waiting until the policy matures (ie until the agreed end date) to get your money out.

• Sell the policy

If you really can't wait until the endowment matures to get hold of your cash, you could probably get more selling it on the open market.

A Google search will come up with dozens of companies that buy and sell endowments.

But if you decide to take this route, make sure you get several quotes.

You will also be losing the life cover element of the policy. (In fact, if you die, the new owner can claim!)

So you will need to factor into your calculations the monthly cost of a new stand-alone policy.

• Make it paid-up

If you can't afford to continue your payments, another option is to talk to your provider about making your endowment paid up.
This simply means it continues to run without any new payments until the agreed maturity date.

Of course, this will affect the final value, so be sure to check this.

• Continue your payments

If the policy has been running for a good number of years, the best option might be to stick with your existing payment but find another way to make up your mortgage shortfall.

To find out more, go to How to make up an endowment shortfall.

To read more on this subject please see the list below or your mortgage guide or your home buying guide

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