Endowment Mortgages

Endowment mortgages are interest only mortgages, coupled with an endowment fund usually linked to stock market performance or some other investment asset. The loan capital is repaid from the proceeds of the endowment policy which runs for the same period as the mortgage. The endowment policy is dependent on regular monthly payments from you, plus the improvement in the underlying asset value over the period. Endowment mortgages were a popular form of mortgage in the 1980's, and performed well up until 2000.

Please Note: Better-Mortgages.co.uk Limited is not authorised to deal in investment based products so this page is for your information only and does not imply we will arrange this type of mortgage for you.

Benefits

Over the long term, the stock market tends to grow. The value of the endowment policy may (but is not guaranteed to) grow by more than is required to pay off the loan capital, leaving you with the excess.

Most endowment policies also act as life insurance policies to the amount of the mortgage, so in the event of the death of the borrower during the term of the mortgage, the mortgage is fully paid off and the house becomes part of the borrowers estate.

Risks

The endowment policy is linked to the stock market. If the stock market goes down (as in the past few years) the end value of your endowment policy will be affected and you may not have enough to fully pay off the loan capital.

If you decide to re-mortgage your property and cash in your endowment policy in the early years, you may not get back the money you've paid in.

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