Here the capital is repaid by one or more endowment policies which are generally of low cost. The phrase “endowment mortgage” is majorly used by the lenders and consumers in the United Kingdom and is not, however, a legal term. The borrower availing the endowment mortgage scheme has two separate agreements where one is with the lender for the mortgage and the other with the endowment policy insurer. The arrangements are quite distinct and if the borrower wishes, the arrangement can be altered. Initially, the endowment mortgage policy was considered an additional security by the lender.
The endowment mortgage policy allows the customer to pay only the interest on the amount of money borrowed. This saves the borrower a lot of money in comparison to the ordinary loan repayment. The main objective of the endowment policy is that investment made is sufficient when the mortgage is repaid at the end of the term. However there are problems related to this policy. The investment growth rate exceeds the rate of interest that is charged on the amount if loan being borrowed.
|
