Endowment mortgages

Changes in the market have meant that thousands of endowments in the UK are not expected to reach their predicted targets upon maturity. If you read about an endowment mortgage in the press today, it’s likely to a report on the many borrowers who have a large endowment shortfall, rendering them unable to repay their mortgage loan in the future.

As with other investment vehicles, with an endowment mortgage you pay a monthly amount into the endowment – an investment policy that also provides life assurance. You also pay your mortgage provider the interest on your loan, meaning that the debt stays constant and does not fall. At the end of the endowment's term, it pays out a tax-free lump sum in the hope that it will be enough to repay the outstanding mortgage in one go. Endowment policies are separate to the mortgage and can therefore be used to support a new mortgage if you switch lender, or move house.

If you’re reading this, then it may be because you have a shortfall on your endowment mortgage. But don’t panic! There is something you can do about it, by consulting a mortgage broker. Rather than give up on the policy and cash it in, a mortgage broker may advise you to take preventative action by switching partly or fully onto a repayment mortgage. This will help alleviate the problem and get your mortgage repayments back on track.

If you are concerned about your endowment shortfall, then check out the L&C endowment shortfall mortgage calculator. The calculator will help you work out whether you can afford to switch the amount of your shortfall to repayment.

See also:
Mortgage comparison - finding the right mortgage broker
Endowment shortfall case study