Endowments: Surrender or Sell?
Should you surrender or sell your endowment mortgage?
Selling Your Policy
The underlying value of a policy may be higher than the surrender value, especially if the investment is allowed to mature over its full term. For this reason, there is a market for buying and selling policies in much the same way as other investments.
This market is worth £500m a year in the UK, with investment companies, banks and pension funds buying endowments as part of their balanced investment portfolios. Endowment policies sold on this market are known as Traded Endowment Policies (TEPS) or more simply as secondhand endowments.
Usually, you'll be able to find a buyer for your policy so long as it's a traditional with-profits fund which you have been paying into for at least 5 years, although the long term attractiveness of policies from different insurers will vary, and so will the price you'll get.
In general though, average prices will be 10-15% higher than the surrender value depending on the insurer, and in some cases much more.
How to sell
There are many online brokers and 'market makers' who will give you an offer on your policy, and ideally you'd get firm quotes from as many as possible before making your decision.
Alternatively, an independent financial advisor (IFA) can handle the selling process for you, and although you won't have to pay a fee for this, the IFA will be paid a commission by the buyer and this may mean you effectively get a lower price.
Other Options
Although selling, and to a lesser extent, surrendering are the most popular ways of restructuring your mortgage arrangements, there are other options. You can make the policy 'paid up', i.e. you stop making any more payments and leave what's already been invested to provide a return (hopefully) when the policy matures, or you can use the endowment as security on a conventional loan.
Both of these entail holding on to your endowment policy, which given the loss of trust in such policies many mortgage holders have experienced, may not be a particularly attractive option.
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