Refinancing Mortgage with Endowment Investments – Is it the way out?

  • SumoMe

Borrowing money to fund the purchase of the policy in this way increases the level of risk significantly. Geared traded endowment policies began to grow in popularity several years ago as minimum investment amounts for geared traded endowment policy portfolios started to fall and access to cheap credit became available, which made borrowing easier.
Investment in geared traded endowment policies can look attractive when credit is cheap and easy to obtain – as was the case until the credit crunch hit in late 2007. Access to easy credit tempted some investors to increase the level of borrowing to a higher percentage of the surrender value of the policy. in some cases they borrowed more in the expectation that the surrender value would rise.
Endowment policies are invested in stocks and shares and other investments. Therefore, like all stock market linked investments, endowment policies involve risk and their value can fall as well as rise. During the 1980’s and 1990’s, millions of people took out interest-only mortgages linked to endowment policies, thus relying on the endowment policy to repay their mortgage at the end of the mortgage term.>

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