What is an...

Endowment Mortgage

An Endowment Mortgage is an interest-only mortgage, which is expected to be repaid by the proceeds of an endowment policy (such as life insurance) on maturity.

Endowment Mortgages were hugely popular in the 1980s and 1990s, but many were mis-sold and large numbers of customers turned out to be at a 'high risk' of shortfall when the term was due to expire.

In many cases they could be described as complicated financial products, which combine life insurance and investment growth in one package. You do not repay any of the capital you borrow during the term of the loan. Instead, the endowment policy should grow to produce a lump sum large enough to repay the full balance at the end of the pre-agreed period, normally 25 years.

Monthly payments are made up of interest and the premium for the endowment policy.

In theory, Endowment Mortgages would allow borrowers to pay a relatively low monthly payment and even enjoy a cash surplus once the endowment policy matures and fully pays off the mortgage. In reality though, endowment policies did not return as much money as originally projected, leaving many borrowers with a shortfall and a large, outstanding debt.

Was I mis-sold an Endowment Mortgage?

If you were misled on the details about Endowment Mortgages by the provider before agreeing to the terms then you could have been mis-sold the mortgage. You may wish to contact the provider directly or seek professional advice to find out more. If, however, you have simply been underwhelmed by the endowment’s performance you will not be due compensation, as it’s the nature of how these mortgages work.

Are Endowment Mortgages still available?

After years of bad press and poor performances (primarily around the shortfalls of maturing endowment policies), Endowment Mortgages have fallen out of fashion and are rarely – if ever – offered by mainstream lenders nowadays. Simpler, more cost-effective mortgages and investment products are now available to customers.

The UK's First Provider Of Online Credit Reports

Launched 25 Years, 35 Million Credit Scores & 8 Million Credit Reports Ago

The UK's First Provider Of Online Credit Reports

Related Jargon