This is the most common type of interest only mortgage which also provides life assurance cover and a fixed payment for investment.

The fixed payments are based on the amount of the loan together with the mortgage term and are designed so that, at maturity, the amount invested and earnings are sufficient to pay off the mortgage.

Much maligned in the press because of the poorer investment growth rates achieved in a low inflationary environment this form of investment is less popular these days.

Note:

There is no guarantee that, when the endowment matures and 'pays out', the balance will be sufficient to repay the mortgage.

Nonetheless millions of borrowers have one or more endowment policy and as a rule of thumb these should not be cashed-in early and certainly not before seeking advice from a suitably qualified financial adviser.

Customers cashing-in an endowment policy in the first few years after inception can receive less than the amount invested.

Existing endowments can be used to support a new mortgage with any ‘additional lending’ over the value of the projected maturity balance being covered on a repayment basis or with an alternative repayment vehicle eg. an ISA.

It is also worth pointing out that historically the returns on endowment policies have been pretty good (provided they go full term).

Endowments provide life assurance so that in the event of death the mortgage is paid off.

For more information about Endowment Mortgages, contact one of our independent advisers.