When doing CeMAP training, delegates have to learn about all the various options available to borrowers, including all the types of mortgages, insurances and general financial information.
An endowment mortgage used to be a very popular type of mortgage. Essentially, an endowment policy is like a ‘savings plan’. Every month, the borrower pays the interest on their mortgage and in addition they make a payment into this savings plan.
The way it is designed, by the time the term of the mortgage is up, the savings plan should have grown sufficiently to pay off the mortgage and the hope is that it will have grown more than the mortgage so that the borrower has a surplus too.
Endowment mortgages hit the media limelight when it became apparent that many borrowers not only did not have a surplus but in fact had a deficit; their mortgage was up and they did not have enough to pay it off so they had to top up their mortgage. Not all endowments were like this, many people did have a surplus.
Every endowment policy has life insurance built in so that should the borrower die during the mortgage term, the balance would be paid off.
Although endowment mortgages are not so popular at the moment, it is still an important part of the CeMAP syllabus.