Endowment Remortgages

Endowment remortgages are specifically designed to get repaid from gains of a policy of endowment assurance. This policy is typically assigned to the lending company, which offers the capital for this mortgage.

Endowment remortgages come under the category - Interest Only Remortgages. Thus, in such kinds of remortgages, the policyholder will only pay the lending company the interest for the duration of the agreement of mortgage.

All of the remaining portion of the remortgage is to be paid once the remortgage matures or the person expires. The payment is obtained from the proceeds of the endowment policy.

What is an Endowment?

Endowment policies are a comprehensive package combining investment, savings as well as life assurance, which is packaged into insurance policy deals.

Whilst the life assurance part of the endowment policy ensures that this mortgage will be paid on the death of the borrower, the savings part is attributed to the fact that only interest needs to be paid during the tenure of the mortgage.

These endowment varieties of policies are unit linked, with profits or unitised along with profits and this can result in accumulation of capital even after repayment of the remortgage amount.

Why an Endowment is beneficial

Endowment remortgages are beneficial because of two main reasons:

• The first aspect lies in the cost-effectiveness. Since endowment remortgages are applied to the interest only remortgage category, the borrower only has to pay the interest amount during the tenure of the mortgage. This results in cheaper monthly remortgage repayments, which results in significant savings.

• The second advantage lies in the fact that with an endowment remortgage, a borrower can afford to spend on more expensive properties, which would not have been feasible with conventional mortgages.

Drawbacks of Endowment Remortgages

Whilst there are positive attributes to endowment remortgages, there are also drawbacks. Most endowment policies have been proven as per statistics to be inappropriate in fulfilling borrower's financial aspirations.

Some people have begun to receive letters informing them that the endowments would not be sufficient to cover the mortgage.

Since endowment policies are strongly tied to financial market conditions and many returns from investment have fallen drastically in the past, many people are scared to invest in such remortgages these days.

If a borrower's endowment policy does not perform as per expectations, a higher repayment amount might be in order, which can put a strain on finances for the borrower.

Switching Remortgage Type May Help

It is understandable that many endowment remortgage borrowers are concerned their investment will not cover the mortgage. This is where switching to a repayment mortgage or one, which operates on a partial payment mode is beneficial.

Instead of paying only the interest through the mortgage tenure, you try to make as much payment as possible to reduce your liability towards the mortgage.

This technique has been proven to help numerous borrowers reduce their liabilities as well as save money. At Remortgage ABC, we provide you with information to switch from your existing endowment remortgage to a better remortgage with lower rates.

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