What Is an Endowment Mortgage, Do I Have One and How Do I Make an Endowment Mortgage Claim?

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Published: 03rd June 2013
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You could be entitled to make an endowment mortgage claim for compensation if your endowment mortgage was miss sold to you. Endowment mortgages occur when a loan is raised for the property on an interest only basis whilst the capital is repaid at the end of the mortgage term using one or more 'endowment policies'. An endowment policy is a life insurance contract designed to pay a lump sum after a specified event, typically in this case a period of years.

What can make endowment mortgages unclear is that the borrower has contractual agreements with 2 separate parties; a lender for the mortgage and an insurer for the endowment policy. Both agreements are usually mutually exclusive and both can be subject to amendments or changes by either the borrower or the lender/insurer.

The logic behind endowment policies is relatively straightforward; the borrower pays only the interest on the mortgage capital, which frees funds to be used to make payments into an endowment policy instead. When all goes to plan, the investment made through the endowment policy is sufficient to pay the mortgage capital at the end of the mortgage term. The borrower may even be lucky enough to receive surplus funds once the mortgage capital is repaid. Tax advantages up until 1984 also helped the endowment mortgage soar in popularity.

By 2001 however, new endowment mortgages were virtually non-existent for a number of reasons and were instead replaced with a wave of endowment mortgage claims for compensation. We have provided a couple of the reasons for the demise below:

Due to the lack of regulation for insurance brokers and providers there was a lot of malpractice in relation to lack of advice in relation to the risks of certain endowment investments that resulted in many borrowers having a deficit at the end of your mortgage term. This meant that the endowment policy once matured, was insufficient to repay the mortgage capital.
Endowment policies are really only effective where the rate of growth on the investment exceeds the rate of interest on the mortgage loan. Due to the fluctuations in the interest rates over the past 20 years many endowment policyholders have found themselves without the funds to pay their mortgage loans.
The Government introduced compulsory 're-projection letters' in 1999 that required insurers to provide up to date projections to borrowers so that they could assess the true performance of their investments and determine whether there would be sufficient funds to enable the mortgage loan to be repaid in full. Following the issue of these letters mortgage and endowment complaints against insurers for miss selling increased, driving the endowment mortgage to virtual extinction.

There are even instances where borrowers are unaware of what type of mortgage they have, or at least do not understand the true nature of their mortgage or the 'lingo' that goes with it. If you can answer yes to most of the following questions the chances are you have an endowment policy. Sinder Claims Ltd can provide a fast and effective Endowment mortgage claim process following a mortgage audit should it be necessary.

Do I have an Endowment Mortgage?

Do you have 2 separate contracts that relate to your mortgage? 1 for an insurance policy and one for a mortgage provider? The endowment policy will be arranged via an insurer provider/broker and there will also be a contract with the mortgage provider to pay the interest of the mortgage capital.
Are you paying only the interest associated with your mortgage? Whilst you could have an 'interest-only mortgage' this is also a feature of an endowment mortgage.
Do you receive regular re-projection letters? If so, do you fully understand what they mean? A lot of borrowers do not fully understand these letters. If you receive a re-projection letter it is worth requesting a mortgage audit from Sinder Claims, you could be entitled to compensation.

If you are unsure of what type of mortgage you have request a mortgage audit today. You could be making an endowment mortgage claim for compensation if your policies were not sold to you correctly!

Sinder Claims Ltd specialise in providing professional advice to help consumers understand their mortgages and what they can expect from them. Should it become clear following their mortgage audit process that your mortgage was miss-sold to you, they can help you make an endowment mortgage claim for compensation to recover what is rightfully yours.

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