What Should I do with My Endowment?
An endowment mortgage is a type of interest-only loan. With a repayment mortgage (also known as a capital and interest loan) each monthly payment includes part of the capital – the original amount you borrowed – as well as the interest owed for that period.This ensures everything is paid off at the end of the mortgage term. With an interest-only mortgage, you are repaying just the interest and need some other way of clearing the remaining debt. That’s where the endowment part of this package comes in.
An endowment policy is a type of stock market investment which runs alongside your mortgage. You make a monthly payment into this policy, and the idea is that the value grows substantially, so that at the end of the mortgage term, you are able to pay off the outstanding capital.
If you have an endowment mortgage, chances are the endowment policy – the stock market investment part of the package – hasn’t performed nearly as well as you expected.
Back in the 80s and 90s, when most of these interest-only mortgages were taken out, holders were led to believe they would be a reliable, low-cost way to clear their capital debt (ie the original amount borrowed).
If you really can’t wait until the endowment matures to get hold of your cash, you could probably get more selling it on the open market. Our free online mortgage finder uk will come up with dozens of companies that buy and sell endowments.
But if you decide to take this route, make sure you get several quotes. You will also be losing the life cover element of the policy. So you will need to factor into your calculations the monthly cost of a new stand-alone policy.
If you can’t afford to continue your payments, another option is to talk to your provider about making your endowment ‘paid up’. This simply means it continues to run without any new payments until the agreed maturity date.
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