An endowment mortgage incorporates two main elements. First of all a mortgage needs to be set up (in this case they are usually interest only mortgages), and secondly a life insurance plan needs to be taken out. The majority of endowment life insurance policies aim to pay off the mortgage when a person dies. If this happens then why does a person need to pay costly monthly instalments throughout his/her life? The answer is that they don’t. An endowment mortgage will combine the fact that the insurer will pay the mortgage when they die, so the only payments that the borrower will need to pay is the interest on the mortgage.

One of the main reasons to gain an endowment mortgage is to pay cheaper instalments on a regular basis. In fact as previously stated, the only payments that you will need to make are payments towards the interest. But there is a problem with this. Whilst you will only be paying off interest towards your mortgage, you will also have to pay off money towards your life insurance policy. These combined bills are likely to be more expensive than a regular mortgage, but you will receive extra benefits that come with having a life insurance policy.

Other issues that can be associated with endowment mortgages is the idea that the end payout from the life insurance company may not be enough to cover the mortgage. This has happened due to the changing inflation and interest rates that have occurred over the past decade or so. In basic terms, poor management by some insurance companies has led to endowments not being large enough to cover the end mortgage. Some people may now argue that it is not enough to simply rely on your endowment insurance payout to cover the mortgage, more funds may need to be acquired in order to secure it. This notion has put many people off endowment mortgages in recent years; however they are making a comeback due to the influx of quality deals making a return to the market. But regardless of how popular they are, they can still be seen as a good way to save money on regular repayments.