Endowment Mortgages

Required Reading


  


Endowment Mortgages


Endowment mortgages and moving

If you are buying your first property with an endowment mortgage, it is very unlikely that you'll be 'seeing the mortgage out'. When you move, you will usually have two options. Either you continue with your original endowment and take out another one for the extra amount you will have to borrow -or you extend and expand your original endowment policy.

The advantage in the first route lies in the fact that you will be able to pay off a portion of your total mortgage loan early, when the first endowment policy matures. The disadvantage is that the cost of the mortgage during the middle years will be relatively more expensive.

Table 14 Moving house with an endowment policy (1)

Total net monthly Net monthly

premiums for interest to

low-cost be paid to Net monthly

Years endowment policies lender servicing cost

£1 £1 £1

1-4


Read More onflexible mortgages

Interest rates - can they get any lower


Interest rates

When you take out an endowment mortgage, the loan is outstanding for the whole 25 years. In theory, the building societies don't like this and without exception they charge a slightly higher interest rate on the loan. At the time of writing, most of the largest building societies were charging a 0.005 differential over the basic mortgage rate is, 113/4 %.

The main exceptions were the Abbey National, Halifax, Nationwide and Woolwich, who all charged a 0.0025 extra. The banks, on the other hand, charged 0.01 extra (with the exception of Lloyds, who stuck to the 0.005 differential).

The difference is not great. Assuming that tax relief is available on the loan, for every 11000 the interest payable per month would be 16.56 . . .... see: Interest rates - can they get any lower


Current Mortgage Offers

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