How mortgage endowments work

How mortgage endowments work

With a repayment mortgage, your monthly payments gradually pay off the amount you borrowed (the capital) as well as the interest over a set period (the term).

But with an endowment mortgage, your monthly payments only cover the interest on the loan. They do not pay off any of the capital. At the end of the term, you need to pay off the capital using the money from your endowment policy.

An endowment policy is an investment plan that you usually pay into each month. Your money is invested – for example in shares or bonds – with the aim of making it grow enough to pay off the original loan when the mortgage term ends.

However, as investments can vary in value, there is usually no guarantee that the policy will pay out enough to repay the mortgage at the end of the term.

If you have an endowment mortgage and are worried, don't make any hasty decisions. Check the facts first. Never cash in your policy or stop your payments without taking proper advice.