Mortgage Endowment Policy
There are two main ways of paying back a mortgage endowment policy, one is a straight repayment mortgage, where your monthly repayments go partly towards paying off the capital that you have borrowed as well as the interest on that amount. The second type is the interest-only mortgage, where your monthly repayments go towards paying off the interest, and at the end of the endowment mortgage term you will need to pay off the capital amount.
For interest-only mortgage endowment policies, you should open an investment vehicle, into which you pay a monthly sum that aims to build up an amount that will pay off the endowment mortgage capital at the end of the term, and hopefully provide a healthy lump sum for your own purposes.
This is where the endowment factor comes in. By having a mortgage
endowment policy alongside an interest only mortgage, people
have a way of paying off their mortgage at the end of the term
when the policy matures. Due to unforeseen trends in the stock market
this did not always work out like this and many people were
left unable to pay their mortgage and having to surrender their
mortgage endowment policy.