Best Buy Mortgages Glossary - Endowment Mortgage
Back to Mortgage
Glossary Main Page
Endowment Mortgage
Endowment-linked mortgages are the main alternative to a
repayment mortgage. Lenders will advance you money and only ask
you to pay the interest back each month. They still want you to
pay off the loan eventually, of course, but they are happy for
you to do this by taking out an endowment life insurance policy
for an agreed length of time (usually 25 years). When the policy
matures, the lender takes repayment of the money owed to him,
any surplus is yours.
Endowment Mortgages have pros and cons.
Main Advantages:
In one policy you are getting a savings plan and some life
assurance - it's convenient.
The endowment policy is completely portable when you move home.
You can offer it as a means of repaying your loan to your new
lender.
Main Disadvantages:
Inflexiblity: if you take out a 25 year policy and cash it in
early, you'll be heavily penalised by the life insurance company
- this is to be avoided at all costs!
High marketing costs: in the early years of your policy, very
little of the money you put into the policy may actually be
invested. That's because the insurance company has to pay
administration costs including the sales agent's commission.
Poor investment returns: the bear market in shares through
2000-2003 resulted in many endowment policies showing a
shortfall on projected returns, leaving people facing the
prospect of not being able to pay off their mortgage without
making further provision to do so.
See also: Current
Mortgage Rates and Deals
Back to Mortgage
Glossary Main Page
How to get your free mortgage quote from Best Buy Mortgages
Compare over 30,000 mortgages using
Best Buy Mortgages comparison
service or get professional help from a qualified independent
mortgage advisor and see how much you could save on your
mortgage payments. There's no obligation, just plain good
advice.
It will only take a few minutes of your time today but
could save you thousands of pounds in interest payments and will
eliminate any worries you may have about getting the best mortgage deal
possible.
You just need to enter some basic information into our secure
online mortgage enquiry form and we will present
you with illustrations of the best mortgage deals we have available.
|
