 Sam
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Joined: 21 May 2005
Posts: 286
Location: CALIFORNIA
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 Posted: Sat May 29, 2004 2:14 am Post subject: Endowment Mortgage |
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Endowment Mortgage is a kind of interest only mortgage which is backed by an endowment policy.
Endowment Mortgage consists of following:
- Monthly interest payments to an Endowment policy (life assurance policy).
- Monthly interest payment to the mortgage lender.
- Endowment premium payments to the lender.
Here the interest rate changes on the mortgage do not affect the premiums due to the endowment policy. This endowment policy enables the borrower to pay off his mortgage when the mortgage term matures. He can also save some money with him. If the total sum does not cover the mortgage principal at the end of mortgage term, the lender will want the person to increase the payments.
For Example, in 2004 Rocky has taken a 30 year mortgage for $500,000. Also in 2004 he buys a 30 years life insurance policy, after 30 years in 2034 he can give this money to the mortgage company. Suppose he dies in 2020, then his family can get one million from Life Insurance Company and can use this money to pay off the mortgage at once. That way they won't be burdened with the mortgage when the main earner dies. |
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