Endowment Mortgage

What is an endowment mortgage?

Until relatively recently most UK mortgage borrowers used an endowment mortgage as their primary form of repaying their mortgage. The attraction of an endowment mortgage is that it could potentially grow to more than is required under your mortgage, enabling you to have a lump sum over when your mortgage finishes. As an alternative, you could pay off your mortgage early. Obviously, the risk is that the endowment mortgage will not perform as well as hoped, and the opposite could be the case.

An endowment mortgage is a type of interest only mortgage where the endowment is used as the savings vehicle to pay back the mortgage loan at the end of the term. The endowment was popular as a mortgage investment since it combined a savings plan with life cover for your mortgage.

However, in the last 5 years or so, the endowment mortgage has lost its popularity due to a number of 'mis-selling' scandals. Many people now find themselves short of their targeted savings and will have to save extra to be able to pay off their mortgages. This has severely affected the public's confidence in the endowment mortgage. In fact most people prefer the safety of a repayment mortgage.

What to do it you have an endowment shortfall

Many people will receive letters from their insurance companies explaining that they have an endowment shortfall.

If this happens to you, you have the right to complain to the company that sold you the policy, if you feel that it was mis-sold. We can help you to do this, if you have a valid claim.

Grounds for a complaint

• The endowment was not suitable for you
  For example you did not realise that it was risky or other options were not discussed.
• The sale did not follow the proper rules
  For example your adviser did not disclose the charges.
• The endowment continues into your retirement
  If the adviser did not ensure that you will have enough income to pay the mortgage, there could be grounds for complaint.
• Churning
  The endowment was sold despite you already having a perfectly adequate policy

For more information, go to the Consumers' Association website: http://www.endowmentaction.co.uk/

We can also show you your available options to deal with a shortfall on your endowment mortgage:

• Top up your payments to your endowment
• Switch your mortgage to a repayment mortgage
• Switch your payments to a safer investment, or a safer fund within your existing endowment

This is a complex area, and you should not take action without advice. To get more information on your endowment mortgage, please contact us.

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.