Endowment Mortgages.

Non-profit endowment.

This policy will have a guaranteed sum assured sufficient to repay the outstanding mortgage on death or survival. These policies are expensive and are not very common these days.

With profits endowment.

The borrower takes out an endowment policy for the same term as the mortgage and a sum assured equal to the value of the loan.

Reversionary bonus, and hopefully a terminal bonus will be added to the sum assured so that at maturity there will be sufficient to repay the mortgage.

Any surplus amount will be returned to the borrower by the building society as a tax free lump sum.

In the event of death the sum assured will be sufficient to repay the outstanding loan plus a surplus depending on bonus performance.

Low cost endowment.

The policy is a combination of a traditional with profits endowment policy and reducing term assurance.

The policy is effected for total cover equal to the loan outstanding. The cover is split between an endowment policy and a reducing term assurance.

A conservative level of bonus is assumed and the term assurance reduces each year as the endowment element increases.

If the endowment sum assured has risen at the assumed rate or better, then the total return will be sufficient to repay the mortgage.

If the bonus rate falls there is no guarantee that the return under this policy will be sufficient to pay the mortgage.

There is always a guaranteed level of death benefit equal to the outstanding loan.

Unit linked endowment.

The term of the policy is for the same as the mortgage term. Premiums are used to buy units in a chosen fund and units are then cancelled to buy the life cover.

The maturity value is dependent on the performance of the units and there is no guarantee that there will be sufficient to repay the loan.

This policy provides a guaranteed death return equal to the outstanding mortgage.
 

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