Endowment Mortgage

What is an Endowment Mortgage?

An Endowment Mortgage is an interest-only mortgage where the Capital is expected to be repaid by the proceeds of an insurance policy on maturity.

Endowment Mortgages were hugely popular in the 1980s and 1990s, but many were mis-sold and many 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. Essentially, you do not repay any of the capital you borrow during the term of the loan, but the endowment policy should grow to produce a lump sum large enough to repay the balance in full at the end of the pre-agreed period, normally 25 years.

Monthly payments are made up of interest on the mortgage loan and the premium for the endowment. Within the package you also pay for life insurance which will repay the loan if you die but there is no guarantee your endowment will pay off your mortgage.


Q: Was I mis-sold an endowment mortgage?

A: 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 and as such could be entitled to compensation. If however you have been underwhelmed by the endowment’s performance you will not be due compensation, as it’s the nature of how these mortgages work.

Jargon Buster

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