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What is an Endowment Mortgage?
When you have an interest only mortgage the amount you borrowed must be repaid at the end of the mortgage term.One way to do this is with an endowment taken out for a similar term to the mortgage.
What are the risks of an endowment mortgage?
The risk with endowment mortgages is that the return on your endowment will not be sufficient to pay off your mortgage. However, the benefits are that you will have accrued enough money to pay off your loan outright and leave yourself mortgage free.
Types of endowment mortgage
There are four main types of endowment mortgage. These are non-profit, with profits, low cost and unit linked endowments.
A non profit policy guarantees a sum that will pay off your mortgage but are often very expensive. When you choose a with profits endowment any money left over when the mortgage has been paid off is yours. A low cost endowment is more affordable as you can still make a profit but a cap is set on how much you make. A unit linked endowment offers a guarantee on death return that will be equal to the value of the outstanding mortgage.
Where can I find an endowment mortgage?
When searching for an endowment mortgage the best place to start is on the internet. If you want to find quotes form lots of different companies quickly then try looking on mortgage comparison websites.
Mortgage comparison websites will enable you to see quotes from several different companies at once so you can gauge the different offers and the pros and cons on offer from different companies.
When using a comparison website always try to enter as much accurate information as you can about your situation such as the amount you want to borrow and your current income. The more information you enter into the site the more accurate the quotes you receive will be, which will save you search time in the long run because you won’t have to trawl through offers that are inappropriate for you.
Once you have found a few quotes then it’s a good idea to visit the sites of different mortgage brokers directly so that you can look at their mortgage policies more carefully. An endowment mortgage is a huge financial commitment so it’s essential to make sure you understand exactly what you are signing up for before you sign on the dotted line.