Endowment Remortgages

What is an Endowment Remortgage

Endowment Remortgages are designed to be repaid by the proceeds of an endowment assurance policy which is assigned to the lender providing the mortgage capital.

Endowment remortgages are mainly applied to interest only remortgages, were the policyholder pays the lender's interest for the term of the mortgage agreement. The remaining debt is payable on maturity or prior death of the policyholder, and often paid by the endowment policy.

The endowment policy is a combination of savings, investment and life assurance packaged as an insurance policy. The life assurance aspect ensures that the mortgage is automatically paid off if the borrower were to suddenly drop dead.

Endowment Policies can often be with profits, unit linked or unitised with profits. Sometimes this provides additional capital for the policyholder after the mortgage lender has been repaid.

Advantages of an Endowment Remortgage

  • Cheaper remortgage repayments
  • Borrowers can typically afford a more expensive property

Disadvantages of an Endowment Remortgage

  • Historically many endowment policies have failed to meet financial expectations
  • Many people are now getting letters warning that their endowments may not cover their mortgage
  • As the endowment policy is weighted on the financial markets and investment returns have fallen in recent years this can be a frightening concept
  • If the endowment policy is deemed to be under performing the borrower will probably need to increase the repayments into the investment fund

Back to Endowment Remortgages

Skip To Content