Endowment Mortgages Endowment mortgages are used to repay only the interest from the borrowed amount. This type of loan covers both the remaining amount owed and creates interest to pay off the capital of the loan.

The main purpose of endowment mortgages is to pay off the interest created and to save enough to cover the left over amount of the mortgage. In an endowment mortgage while the borrower pays the interest on the policy this provides a means to generate enough money to pay the mortgage off.

Some of the benefits of the endowment mortgage are that they not only pay off your mortgage at the end of the policy but leave a little extra money. For this reason people in the United Kingdom choose to take out an endowment policy. There are other reasons to do this though.

Aside from leaving the borrower with extra cash at the end of the policy, endowment mortgages have historically had considerable tax benefits. These tax benefits are better than standard mortgages. The premiums of the loan are unlikely to need as much collateral. Kept a secret, it is considered by many to be an insider secret. Unfortunately, it was reformed to where endowment mortgages don’t get the tax benefits they used to.

One more benefit of the endowment mortgage is for the golden age customers. The mortgage when used by a member in their golden years is the addition of a life insurance policy. The insurance policy, in the unfortunate event of your death, would pay off your mortgage in full.

Though the endowment mortgage has many powerful benefits it is not for everyone. Two of the major disadvantages is they don’t receive the tax benefits anymore, and the falling of interest rates. The major downfall is the falling of interest rates. In years past the UK had high interest rates that by the end of the endowment mortgage you could not only pay off your mortgage but leave a sizable amount of money. Now with rates being so low the endowment mortgage is in danger of not being able to pay off your borrowing.

Go back