Are Endowment Policies relevant anymore, and what is the risk involved?
An Endowment mortgage is a type of interest only mortgage, where monthly interest payments to the mortgage lender and monthly payments into an endowment policy are made. By taking out an endowment policy over the full term of your mortgage you should hopefully generate enough cash to pay off your mortgage and possibly have some money left over. Depending on the performance of the investment, the capital growth may exceed the value of the mortgage capital or fall short. If the lump sum does not cover the mortgage capital at the end of the mortgage term you will be liable to make up the shortfall yourself. In recent years as interest rates have been very low and therefore endowment mortgages have not been hugely successful.
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