Disclaimer:

The Money Advice Service website and publications are here to help you manage your money better and make informed choices. They are intended for customers of UK financial services who live in the UK. Our Money Advice Line can give you information and advice about your money on 0300 500 5000. You might also need to consult a financial, legal or other professional adviser. The Money Advice Service is not liable for any damages (including, for example, damages for loss of business or loss of profits) arising from the use of the Money Advice Service website, or any material contained in it, or from any action or decision taken as a result of using our website or any such material.

© The Money Advice Service – www.moneyadviceservice.org.uk.

Mortgage endowments

A mortgage endowment is an investment taken out to cover the repayment of an interest-only mortgage when the term comes to an end.

How they work

With a repayment mortgage, your monthly payments gradually pay off the amount you borrowed (the capital) as well as the interest over a set period (the term).

But with an endowment mortgage, your monthly payments only cover the interest on the loan. They do not pay off any of the capital. At the end of the term, you need to pay off the capital using the money from your endowment policy.

An endowment policy is an investment plan that you usually pay into each month. Your money is invested, for example in shares or bonds, with the aim of making it grow enough to pay off the original loan when the mortgage term ends.

However, as investments can vary in value, there is usually no guarantee that the policy will pay out enough to repay the mortgage at the end of the term.

Reprojection letters

If you have an endowment policy, you should have received regular letters over the last few years telling you whether your policy is on track to repay your mortgage. They tell you:

  • whether your policy is still on track to pay out the amount needed to repay your mortgage at the end of the term

  • the amount of projected shortfall, if any

  • the options open to you, and

  • what further action you need to take.

If you haven't received a reprojection letter, contact your policy provider and ask for one. If you have received a reprojection letter, make sure you read it and take action if you need to.

If there is a high or significant risk that your policy is not on track to repay your mortgage (so the reprojection letter is either red or amber), this section tells you what you can do about it.

If you have an endowment mortgage and are worried, don't make any hasty decisions. Check the facts first. Never cash in your policy or stop your payments without taking proper advice. You could lose out if you do.

If you have a shortfall

Our Dealing with your mortgage shortfall printed guide gives you more detailed information and sets out:

  • why you need to review your endowment (or other investment or savings plan) regularly

  • what to do if you think it won't pay out the target amount, and

  • what you can do later if you can't take action now.

You can download it from Free printed guides, where you can also order it online.

If you want to make a complaint

If you think you may have grounds for complaint you should act now as time may be running out. See If things go wrong or get our Making a complaint printed guide which gives you more detailed information. You can download it from Free printed guides, where you can also order it online.