Endowment Mortgage

An endowment mortgage is a mortgage loan arranged on an interest-only basis where the capital is intended to be repaid by one or more (usually Low-Cost) endowment policies. The phrase endowment mortgage is used mainly in the United Kingdom by lenders and consumers to refer to this arrangement and is not a legal term. If the individual dies during the endowment mortgage period then the mortgage provider retains the property.

The borrower has two separate agreements. One with the lender for the mortgage and one with the insurer for the endowment policy. The arrangements are distinct and the borrower can change either arrangement if they wish. In the past the endowment policy was often taken as an additional security by the lender. That is, the lender applied a legal device to ensure the proceeds of the endowment were made payable to them rather than the borrower; typically the policy is assigned to the lender. This practice is uncommon now.

Read more about Endowment MortgageReasons For An Endowment Mortgage, Traded Endowment Policies, Problems With Endowment Mortgages

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Problems With Endowment Mortgages - Shortfalls
... compulsory re-projection letters to show existing endowment holders what the likely maturity value of their endowment would be assuming standard growth rates ... financial position they would have been in had they taken out a repayment mortgage instead ...

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