Endowment mortgages explainedEndowment mortgage problems

An endowment mortgage is a combination of an interest-only mortgage and an investment (the endowment policy). Over the term of the mortgage you pay interest on the amount borrowed to your mortgage lender and a monthly premium to your endowment policy.

The endowment premiums are invested and the idea is the endowment produces enough capital at the end of the term to pay off the mortgage.

But many endowments haven’t worked out as planned. Now consumers are facing the two problems of shortfalls and mis-selling.

Shortfalls

If your endowment policy hasn’t increased enough to pay off your mortgage, you will have a projected shortfall and you'll need to find some other way to pay off this part of your mortgage.

Millions of endowment policies are predicted to fail to pay off the mortgages they cover.

When these mortgages were sold, many consumers didn’t understand that it was possible to have a shortfall because they believed the policies were safe, or guaranteed to pay off their mortgage.

Do you have an endowment shortfall?

You should have received several letters from your endowment provider over the past few years explaining how your endowment policy is performing and whether it's likely pay off your mortgage. If you have a shortfall or you’re worried you might end up with one, you must take action now.

Mis-selling

Millions of people may have been mis-sold their endowment policy in the first place, meaning that the policy was inappropriate for them.

There are many reasons why an endowment policy may not have been suitable for you. If you were not informed of the risks, you may have grounds for complaint.

Was your endowment mis-sold?

If you were mis-sold an endowment you may be entitled to compensation and you should first work out whether you were given bad advice.

It’s really important to remember that you’re complaining about the advice you received when you bought your endowment, not the fact that you have a shortfall.

It's really important to take action quickly. There are time limits on making a complaint and if you wait, you may run out of time.

More information

We've heard of many offers of compensation being wrongly calculated. If you are unsure whether your offer of compensation is correct, you can check the calculator on exasoft.biz.

The calculator has been produced by the same company that supplies the redress calculation package to the Financial Ombudsman Service, the Financial Services Compensation Scheme, the Law Society and over 95% of the industry. You will be charged £52.20 to use the calculator.

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