| Back in the 1980s word went around that there | | | | First of all you need to look carefully at your |
| was a wonderful new way to pay your mortgage. | | | | endowment mortgage to determine its value. If |
| In those days the process of getting and running | | | | you are still in the early years of its operation, |
| a mortgage was almost sacrosanct, and little | | | | you will find that despite your monthly payments |
| variation was available. A fairly common route to | | | | you have a document with very little value. This is |
| take was to open an account at the Building | | | | because you have been paying the premium for |
| Society of your choice, and to put in as much | | | | the endowment agreement itself, the interest due |
| money as you could, the intention being to prove | | | | on your mortgage loan and life insurance to cover |
| to said Building Society that you were prudent | | | | repayment of the loan if you should die before |
| and could be trusted with their money. | | | | completion. |
| When the time for a mortgage arrived, it was | | | | A very important factor in an endowment is the |
| best suit on for an appointment with the branch | | | | terminal bonus. You will have received the benefit |
| manager to convince him of your dependability, | | | | of annual bonuses along the way, but the terminal |
| and if you were successful you were given a | | | | bonus is normally the very high value one; it could |
| (typically) 25 year repayment mortgage. Inflation | | | | well provide more than half the final value of the |
| was your friend because you usually started off | | | | payment which you will receive, but will be lost if |
| committed to a monthly repayment which made | | | | you cancel. To make matters more difficult, the |
| yours eyes water, but as time went by the real | | | | value of the terminal bonus is not guaranteed and |
| value of this dwindled in significance. | | | | will not be known until the endowment is fully paid |
| When you had completed your 300 monthly | | | | up. It may be that you are in the situation where |
| repayments the property was yours. It was all | | | | you will lose money whichever route you take. |
| very straightforward until the endowment | | | | If you do decide to proceed with the sale of the |
| mortgage arrived. With this you paid only the | | | | endowment, either because you need the money |
| interest due, with a promise of lower monthly | | | | or because you are in the fortunate position |
| commitment. At the end of the term a sum | | | | where sale would be advantageous, you need to |
| would be handed to you which would be sufficient | | | | shop around. Certainly you should obtain a sale |
| to pay off the capital sum of the mortgage and | | | | figure from the company who provided the |
| leave you with enough to enjoy a brief excursion | | | | endowment in the first place, but you are also |
| into the wild life of regular meals and even exotic | | | | free to go into the market place for these |
| holidays, which in extreme cases may even have | | | | mortgages and see what offers you can get. It is |
| been outside the UK! | | | | very likely that the price which you will be offered |
| That was the dream which was eagerly taken up | | | | in this way will be better than that which the |
| by many hardworking mortgage owners and | | | | original issuer is prepared to allow you. |
| unfortunately, also by some over eager salesmen. | | | | You will find that different companies have |
| The sum necessary to pay off your mortgage | | | | different criteria relating to which endowments |
| was not guaranteed, and in the majority of cases | | | | they would be interested in buying. For instance, |
| it didn't. Therein lies the formation of the | | | | some will not be interested if the sale value is |
| mis-selling scandal; many building societies took | | | | below a certain figure, or may require the |
| great care to explain to their mortgage | | | | endowment to have been operational for a |
| customers the modus operandi of the | | | | specific minimum period. Realistically you should |
| endowment system and the many pitfalls which | | | | seek professional help in reaching a decision; a |
| could trap the unwary. Tragically many individual | | | | company which has contacts within the |
| salesmen and some building societies omitted to | | | | Association of Policy Market Makers (which |
| adequately cover some of the less palatable | | | | represents companies who deal in endowment |
| facts. | | | | trading) will be better placed to find you the best |
| This created great distress in some cases; figures | | | | deal. There will be a charge for their expertise, |
| produced for 2004 show that almost 7 million | | | | but you should benefit from a better price and |
| endowment mortgages were unlikely to provide | | | | save yourself a lot of time, work and worry. |
| sufficient funds to pay off the mortgage debts, | | | | Remember that if you sell your endowment |
| leaving less than 2 million which should achieve | | | | mortgage, you will fairly certainly also be cancelling |
| their objective. Thus the flood tide of the 1980s | | | | your accompanying life cover and should ensure |
| which saw home owners clamouring for | | | | that you obtain a replacement policy, preferably |
| endowment mortgages suddenly became an ebb | | | | before the cancellation takes effect. There is little |
| tide, with endowment holders looking for a way | | | | harm in duplicating your cover for a short time, |
| of getting back to the old system, or to one of | | | | but there could be very unfortunate results from |
| the newer but more reliable alternatives. Great | | | | even the shortest period without cover. |
| caution is necessary in this situation. | | | | |