In the UK many people were advised to get an endowment policy for their mortgage. It was common practice, if you were going to buy a house and needed a mortgage you would get an endowment policy to run alongside the mortgage. Every one accepted this practice and many people went for these endowment mortgages rather than straight forward repayment mortgages. Whilst this worked fine for many years a recent period in the UK of poor performing policies and dips in the stock market has meant that many peoples endowments have not realised there full value.
An endowment is a policy you take out from an insurance company when you take on a mortgage. The mortgage advisor would explain the type of policy and level of premiums you would need to cover your circumstances. The endowment would usually be taken out over the same period as your mortgage so if you have a 25 year mortgage you would also get a 25 year endowment.
For the period of the policy you would pay your monthly premiums, each month that premium would go towards your endowment. This endowment is usually a mixture of stock market investments which generally increase in value of the long term. The hope is that your premiums invested wisely in your endowment will realise a value at the end of the term of at least the value of your mortgage.
You can take out endowments of differing values but generally the more you pay in premiums the greater the maturing value of the policy will be. If you have a large mortgage you are going to have to pay higher premiums to reach that higher maturing value to cover the cost of your mortgage.
Many endowments were miss sold and that lead to their being a gap between the final value of many endowments and the actual amount owed on the mortgage. To cover this home owners have had to increase their premiums or surrender their endowment and get a straight forward repayment mortgage.
If you wanted to realise the value of your endowment policy you have a couple of options. The most obvious option is to cash in the policy by selling it back to the insurance company. This may be an option if you need the cash for some reason or you have found out your policy is not going to be substantial enough to cover your mortgage.
Whilst surrendering your endowment is one option it is not always the best option to realise the best return. There is a second hand market for endowments where investors look to buy your policy and use it as an investment or sell it on. By selling your endowment on the second hand endowments market you can get more money than you would otherwise have gotten by surrendering the policy.
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