|
Endowment Mortgage
Most mortgages today are available either on a repayment or an interest-only basis.
A repayment mortgage may appear to cost more than an interest-only mortgage, however the monthly payments will cover both the interest on the loan and also a proportion of the capital borrowed, so the outstanding debt is getting smaller all the time and will be repaid in full at the end of the mortgage term.
An interest only mortgage means that monthly payments to the lender cover only the interest charged on the loan and do not include any repayments of the capital borrowed. You are therefore strongly advised to set up a separate savings or investment scheme to ensure that you have enough money to repay the lender at the end of the mortgage term.
Interest only mortgages are attractive to some people because, if they do not save any money each month towards the future capital repayment, then they can reduce their monthly outgoings to the bare minimum. However, this kind of arrangement also gives you more control over your money and allows you to save and invest in any way you choose, so if you know what you are doing and choose wisely, you may accumulate capital faster than otherwise.
An endowment mortgage policy is one way of saving towards the future capital repayment of an interest-only mortgage. This is a type of life insurance policy combined with a savings plan, aimed at giving you sufficient funds by the end of the set mortgage term. You should check carefully to see whether the plan offers a guarantee of its future value, which is sufficient to repay the mortgage.
As with any type of mortgage or life insurance policy, you need to take care that you get the best possible advice from a qualified professional in order to ensure that you make the right choice for your personal circumstances.
For further information click here for independent mortgage advice and quotation.
NOTICE: A mortgage is a loan that is secured on your home and you also need to think carefully before securing any other debts against your home. Your home could be taken away by the lender and sold if you do not keep up the repayments on the mortgage or any other debt secured on it - if you are in any doubt, seek independent professional advice. These notes are offered as a general guide only and do not constitute mortgage or financial advice.
|
