What Is An Endowment Mortgage?
An endowment mortgage, in theory, is supposed to lower your mortgage payment. Ideally, endowment mortgages are much cheaper than standard mortgage policies such as repayment mortgages. When you get an endowment mortgage, you pay only the interest on the amount borrowed. In addition to this, you pay an addition small sum into a policy that is supposed to be ever-increasing: the endowment policy. This policy is supposed to grow and grow, and at the end of the mortgage term you use this money to pay off your capital.
The customer pays only the interest on the capital borrowed, thus saving money with respect to an ordinary repayment loan; the borrower instead makes payments to an endowment policy. The objective is that the investment made through the endowment policy will be sufficient to repay the mortgage at the end of the term and possibly create a cash surplus.
-Endowment Mortgages, Wikipedia, June 2006
Endowment mortgage is actually not a legal term. This type of mortgage policy was popular in the 1980s, especially in the UK, but natural fiscal problems and stock market lows made many of these policies practically...
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