Endowment Mortgages - What Is An Endowment Mortgage & How Does It Work?

An endowment mortgage is an alternative to a repayment mortgage and it is basically an interest only mortgage plus a life insurance policy which has an investment element to it. The investment part is intended to repay the capital of your mortgage by the end of the mortgage term. However unlike a repayment mortgage, this is not certain as the investment as an element of risk to it. Endowment mortgages used to be quite popular, but nowadays repayment mortgages are more in favour as they are simpler and safer than endowment mortgages. One of the main disadvantages of endowment mortgages is that for you to get real value from your endowment investment you need to keep paying in to it until the end of the mortgage, otherwise you could lose out. Also if you are a single person and don't have any children then you don't really need the insurance element of an endowment mortgage and a repayment mortgage would be a better option.

Endowment mortages used to have some tax advantages but these are no longer available.