Endowment Mortgages
An endowment policy is a long-term savings plan invested in the stock market.
For some people endowments have not proved to be the best type of investment to use with an interest-only mortgage. And, because of recent history, very few advisers these days recommend them as a way of repaying your mortgage.
Endowments had high upfront charges which meant that, for the first few years of paying into the policy, much of your money wasn't invested for you, but was paid to the adviser who sold you the product. Because you were investing in the stock market, there was no guarantee that your investment would grow fast enough to repay your mortgage.
An endowment policy automatically gave you life cover which would pay off the loan if you were to die during the term. There was a real possibility that the endowment policy would not grow enough to pay off the mortgage. This meant that the endowment mortgage could end up costing you more than a repayment mortgage, and that you'd have to suddenly find the money to make up the shortfall from elsewhere.
There was a very low cash-in value if you stopped paying the premiums in the early years. This meant that you got back less than you'd paid in premiums, or even nothing at all. This made endowment mortgages particularly inflexible if you ran into problems keeping up the mortgage repayments.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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The Financial Services Authority does not regulate some forms of Mortgage.
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