Endowment Mortgage

Endowment-linked mortgages are the main alternative to a repayment mortgage. Lenders will advance you money and only ask you to pay the interest back each month. They still want you to pay off the loan eventually, of course, but they are happy for you to do this by taking out an endowment life insurance policy for an agreed length of time (usually 25 years). When the policy matures, the lender takes repayment of the money owed to him, any surplus is yours.

Endowment Mortgages have pros and cons.

Main Advantages:

In one policy you are getting a savings plan and some life assurance - it's convenient.
The endowment policy is completely portable when you move home. You can offer it as a means of repaying your loan to your new lender.

Main Disadvantages:

Inflexiblity: if you take out a 25 year policy and cash it in early, you'll be heavily penalised by the life insurance company - this is to be avoided at all costs!
High marketing costs: in the early years of your policy, very little of the money you put into the policy may actually be invested. That's because the insurance company has to pay administration costs including the sales agent's commission.
Poor investment returns: the bear market in shares through 2000-2003 resulted in many endowment policies showing a shortfall on projected returns, leaving people facing the prospect of not being able to pay off their mortgage without making further provision to do so.

Get professional help from a qualified independent mortgage advisor and see how much you could save on your mortgage payments. There's no obligation, just plain good advice.

See also: Financial Services, Mortgages