11 March 2007

Endowment mortgages

In the UK, home ownership is the norm and mortgages are a fact of life for almost everyone. A popular way of planning to pay the mortgage is the endowment mortgage. For the past twenty years this method has outstripped the traditional repayment mortgage. Why? Because the growth of the endowment policy value was expected to accumulate enough cash to repay the original mortgage sum at the end of the period, and often leave a surplus for the home buyer. But the plan did not work and many of these policies will not be worth the sum of the mortgage at maturity. Policyholders who decide to surrender their policies need to be aware that they don't have to accept the (very low) offer from the insurance company. There is an active market for purchase of the policy by a third party for a higher price, and any housebuyer can check the offers from these services when they decide to sell endowment policies.

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