27 April 2007

Lending

A popular form of mortgage lending is the endowment mortgage, where only the interest on the principal of the loan is due. Repayments of the loan principal is planned on maturity of insurance known as an endowment policy taken out to cover the value of the loan. The policyholder makes regular monthly payments over the loan period to ensure they will be able to pay off the loan when it comes due on maturity of the policy. Endowment policies were very popular in the 1970’s and 1980’s and were expected to be able to pay off the mortgage loan completely leaving a sum on top. However, for a number reasons, many of the endowments are plagued by a shortfall.

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