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An endowment mortgage is a type of mortgage that is interest only with an endowment plan taken out to save money to pay off the mortgage at the end of the term. Each month a person with an endowment mortgage will make a payment to a life insurance company who will invest that payment into a savings plan, or endowment. An endowment plan has life insurance built into it so that if the person with the endowment dies during the mortgage term the mortgage will be paid off. There are two main types of endowment mortgage a unit-linked endowment mortgage and a with-profits endowment mortgage, A unit-linked mortgage relies on the value of the underlying investment when the policy reaches maturity. You should be aware that the units on a unit-linked endowment mortgage can fluctuate and as a result can go up or down. A with-profits mortgage has two benefits, a reversionary bonus and a terminal bonus, with the reversionary bonus being paid once per year until the plan reaches maturity and the terminal bonus is paid when the plan reaches maturity. This terminal bonus, and its amount is dependant on the underlying investment and the amount is not guaranteed. Advantages and disadvantages of an endowment mortgage Advantages An endowment mortgage can be transferred to another property. If the investment grows at a faster rate than predicted the borrower could pay off their mortgage earlier, or enjoy a large lump sum at the end of the endowment period. The inbuilt life insurance can be much cheaper than taking out separate life insurance. Disadvantages If you are looking for a mortgage that is flexible an endowment mortgage might not be for you as you are not permitted to stop and start your repayments. Some endowment mortgages even add a penalty if you cease paying your premiums. You have no guarantee that at the end of the repayment period you will have enough money to cover the mortgage as your investment could go up or down. Charges added to an endowment mortgage are quite high. Endowment mortgage advice Most people you require endowment mortgage advice are those that already have an existing endowment and are reviewing their mortgage options. If you would like to find out more about an endowment mortgage you can read more on the FSA website or get in touch with an independent financial advisor you will be an expert in finding you the right mortgage. Remember many independent financial advisors offer fee free mortgage but there are still some that charge a fee for their services so always check before you accept their advice if it is fee free.
Article Source: http://articlebridge.com
Jason Haines is a protection and mortgage advisor at godirect.co.uk, one of the UK's most trusted information site about personal finance. Here you will find information and links to all the major mortgage lenders, and you can save money on your life insurance quote and mortgage protection as well.
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