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Endowment mortgages

Endowment mortgages see monthly repayments not paying off what you have borrowed, but just the interest of the loan.

Homeowners aim to pay off the capital on the mortgage through investing in an endowment policy – a type of investment. Cash is invested in the stock market or in bonds with the aim of the investment growing over the length of the mortgage to cover amount owed to the lender.

However, unpredictable performance on the stock markets means it cannot be guaranteed how much the endowment will pay out in the end – leading to some controversy in recent years as homeowners have been left with shortfalls. Many endowment policies taken out during the height of their popularity in the 1980s and 1990s are unlikely to pay out what was promised.

Surrendering your endowment is one option however you are still unlikely to recoup the amount originally estimated. Alternatively, you could sell your endowment policy and stand to make substantially more. myfinances.co.uk has teamed up with aap to help you determine whether your policy is suitable for sale and could potentially get you up to 35 per cent more cash than the surrender value offered.

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