Cashing in endowment policies to pay off a bond

A Fin24 user is not sure if he should cash in his endowment policies to pay of his bond or not. He writes:

I turned 50 this year and have two endowment policies with Sanlam. One has been going from April 1991 and runs till April 2021. The current monthly premium is R762.85.

The other ran from April 1993 and ends April 2028 with a current monthly premium of R678.16.

Should I cash in these policies now and pay of my current home loan of R150 000 - five years still left of paying off the bond - and then invest the remainder of the policy proceeds along with the monthly bond amount?

Danelle van Heerde, head of advice processes and tools at Sanlam [JSE:SLM], responds:
 
To determine whether it would be better to cash in your policies and pay off your outstanding home loan, you need to consider a number of factors.

Firstly, you need to compare the investment return after fees on your policies with the interest you are paying on the home loan.

Home loans typically have much lower interest rates than short-term debt like credit cards.

You also need to consider any penalties that may be payable on cashing in your policies. If the policies have risk cover, you need to determine whether you still need the cover.

If your home loan provides access to the capital that has already been paid (that is an access bond), you should also consider the impact of losing this access.
 
A registered financial adviser will be able to help you compare the alternative options and make an informed decision.

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