Endowment Mortgages

Endowment Mortgages Endowment mortgages began during the housing boom in the 1980’s and served as a hot financial product. The idea was simple; stock markets grow faster than interest on debts. This meant that instead of putting money into paying off loans, it was a better investment to just pay the interest on the loan and to put any extra monies available into the market using an endowment fund.

Using this method would be cheaper than paying off the loan directly and if you were a wise investor you could make extra money off your investments. In the beginning this was a good way to make money, and many people whose policies paid out in the late 1990’s were seeing the full benefit of these endowments, plus in many cases surpluses.

Then the market’s crashed. In 2001 the markets lost 20% and have still not recovered. All of a sudden rather than covering the original loan with possible surplus, these endowments began falling short. For millions this meant paying thousands of pounds when their policies expired and the original loans came due. Many people were caught completely off guard by this as when they bought the stock markets were soaring and the possibility of any shortfall was not even a thought.

With 11 million endowment policies in place, after years of making payments, many Britons were faced with a bill rather than a mortgage-free life. The banks started sending out new projections showing which policies were on track to meet their loan requirements and which ones were not. Many received notices that informed them that their endowment was falling short of the projections and many people had to turn to their mortgage providers for help.

This is how endowment selling came to be. Endowment surrender and / sales can be difficult to understand, and therefore the following information is available to provide you with further information on selling your endowment policy.

QUESTIONS ABOUT ENDOWMENT SELLING

Endowment Policies WHY SELL AN ENDOWMENT POLICY?
Many policy holders want to sell their endowment for one of two simple reasons. Either they are trying to sell the endowment because it has performed badly in the past, or they are trying to sell it to raise money now. The only other option for a person is to surrender their endowment, however the surrender value tends to be much lower than the value is upon selling it. If you want to get the most money back when selling your endowment, then it is best to sell that endowment to a broker or company that buys second hand endowment policies.

CAN ALL ENDOWMENT POLICIES BE SOLD?
IF NOT, WHICH ONES CAN BE? It is important to note that not all endowment policies may be sold to secondhand broker. Unit linked endowments are ones that may not be sold, however consult with a financial planner to find out if there are other options available to you. With profits endowments are easily sold as many companies are looking to buy policies like this. When you receive quotes, they should be significantly greater than if you surrender an endowment to the insurance company. Many times as much as 10-15% more.

It is important to note however, that this will depend on how long you have had the endowment running for. Members of the APPM can only buy and endowment that has been running for at least 1/3 of its full term or five years, which ever is longer. It is also important to note that although the APPM says that you can only sell an endowment with a minimum surrender value of £1,000, it may be hard to find a buyer for anything policy with less than a £3000 surrender value.

HOW QUICKLY WILL I GET PAID IF I SELL MY ENDOWMENT?
Once you accept an offer for your endowment and return the necessary paperwork, payment should be received in about 4-6 weeks, however it can take longer.

HOW DO I KNOW IF I SHOULD SELL MY ENDOWMENT POLICY?
If you are unsure as to whether this is the right move, then it is best to consult with a financial advisor as they can best explain to you each of your options and how they will impact you. Alternatives may be available to selling your endowment policy, like making the policy “paid up”. Basically stated this means that the policy holder will stop paying the premiums and accepts the fact that they will receive a smaller amount when the policy matures. Another option, which is sometimes overlooked by the policy holder, is the option to take a loan out against the value of the policy. And it is important to note that making the policy paid up will cause you to lose your life insurance cover and so this option may not be best for everyone.