Endowment Mortgages - Information, advice and solutions available
Endowment mortgages were conceived in the 1960's, and for a period of almost 25 years were the most popular type of mortgage.
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Here we delve deeper into the problems of Endowment Mortgages and the potential solutions and help available from Shire Direct should you have one - please bear in mind we don't actually provide investment based mortgages such as the Endowment Mortgage - however we can help if you are lumbered with one!
Table of Contents:
What is an Endowment Mortgage?
So, what are Endowment Mortgages? Well an Endowment Mortgage was a type of mortgage conceived in the 1960's, and for a period of almost 25 years were the most popular type of mortgage.
The way in which they were designed to work was an investment to run alongside an interest only mortgage loan, by means of a qualifying life insurance policy, usually over a 25 year term. The monthly endowment policy premium, or the investment element of it, was geared to provide a lump sum sufficient to repay the mortgage principal at the end of the mortgage term, and to have grown to provide a bonus amount over and above the size of the mortgage.
An advantage of the endowment policy was to provide life cover in order to repay the mortgage borrowings in full, in the event of premature death of the policy holder(s).
The Endowment Mortgage Shortfall - how did they go so wrong?
Much of the 1960's, 1970's and 1980's were years of high interest rates and high inflation.
As a result, the basis on which endowment policies were arranged involved calculating rates of investment returns exceeding 10% per annum.
Indeed the 10% plus annual investment returns were infact prevalent until the early 1990's when successive governments made their economic targets to substantially reduce the rate of inflation to between 1.5% and 3%. And this was largely achieved.
As a result investment yields plummeted and Endowment returns also slumped. It became apparent that endowment policies were going to fail to reach their investment target. Policyholders were notified that their endowments were going to fall short of the amount required to repay their mortgages at the end of the term, in many cases substantially!
If I still have an Endowment Mortgage, how can I ensure my mortgage is paid off?
The only way you can guarantee your mortgage will be repaid by the end of the mortgage term, is to convert your borrowings to a capital repayment basis.
However, there are other alternative actions you can consider, including:
- Convert your mortgage to a capital repayment basis
- Consider a "part and part" mortgage, i.e. keep your endowment in place, but only to the extent of the revised projected endowment lump sum. Leave this element of your mortgage on an interest only basis. Covert the balance to capital repayment
- Surrender (or auction) your policy, and repay the proceeds off your mortgage balance, and convert the remainder to a repayment basis. Before surrendering a policy, you should seek the advice of an Independent Financial Advisor.
Endowment Mortgage Advice - can Shire Direct help me?
Simply call one of our friendly qualified mortgage advisors, who will carefully assess your circumstances, needs and aspirations, and will then discuss the various options available to you, and explain both the benefits and downsides of them!
So, if you need to discuss it, give us a call on Freephone 08000 282 281 (or contact us online), our lines are open 7 days a week from 8am until 10pm. We'd love to hear from you!
That wraps up our look at Endowment Mortgages and the endowment mortgage shortfall problem and how Shire Direct can help if you have one of these mortgages. Remember, there is a wealth of further mortgage related information throughout our website, and we're only ever a couple of mouse clicks or a free phone call away and would be delighted to assist you in any way we can!
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
Are you worried and becoming stressed because you are having problems getting a mortgage or remortgage? Worry and stress no more! Here at Shire Direct we provide tailor made mortgage solutions to suit you, and can usually help with all kinds of circumstances including...
Remember, we're here to help, and would love to hear from you!
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