Dealing With An Endowment Mortgage Shortfall

2007-03-08 10:33:40

( Financial )



Endowment mortgages are mortagage loans that allow you to pay for only the interest the becomes due each month. There is also a built in savings plan in the form of monthly premium payments, which is invested and used to repay the mortgage loan at the end of the mortgage term. The amount that is saved however, does not always pay for the full amount of the mortgage loan. When this happens, an endowment mortgage shortfall occurs.

Your mortgage lender will notify you by email or letter of the projected mortgage shortfall that is expected or projected endowment mortgage shortfall that is to occur.

Some mortgage lenders will propose that you make higher premium payments to meet the shortfall; however, this advise should not always be followed because there are certain fees that you need to pay during the first few years of making payments. Increasing your premium payments will only make you liable to more fees, and paying for a commission fee to the mortgage lender.

You should consider making other forms of investment instead such as opening an investment savings account to make up for the endowment mortgage shortfall.

You can also convert your entire mortgage loan to a repayment mortgage scheme. You can continue to pay for your premiums, and utilize it later on a as a form of savings, or you may decide to stop paying for your premiums altogether. Should you decide to stop paying for your premiums, the amount of premiums that are still left on your account will still be continued to be invested until the mortgage loan matures. You will then receive the proceeds from the investment, but the amount will be much less than what you have expected it to be. Charges may apply if you stop paying for your premiums, so its best you check with your mortgage lender.

You should also seek the advise of your mortgage lender who may recommend other options to make up for your endowment mortgage shortfall.


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