ENDOWMENT MORTGAGE Meaning and
Definition
-
An endowment mortgage refers to a type of mortgage arrangement where the borrower utilizes an endowment policy as an investment vehicle to repay the mortgage at the end of its term. This form of mortgage typically consists of two separate components: the interest-only mortgage loan and the endowment policy.
The interest-only mortgage loan is the primary component of an endowment mortgage. It involves making monthly payments solely covering the interest amount charged on the loan, resulting in no reduction of the principal amount borrowed over time. These interest payments are made regularly throughout the mortgage term.
The second aspect of an endowment mortgage is the endowment policy itself. This policy serves as an investment tool, with the borrower making regular contributions into the policy. The contributions typically consist of a combination of premiums and investment returns. The aim is for the endowment policy to accumulate enough funds to repay the mortgage loan in full at the end of its term.
Ideally, the investment growth within the endowment policy should exceed the amount required to repay the mortgage principal. However, there is no guarantee that the policy will yield sufficient funds, as it is subject to market performance and other factors.
In the event that the endowment policy fails to generate enough money to fully repay the mortgage, the borrower may face a shortfall at the end of the mortgage term and must find alternative means to cover the remaining amount owed.
Endowment mortgages were popular in the 1980s and 1990s but have since declined in popularity due to regulatory changes and concerns over their performance.
Common Misspellings for ENDOWMENT MORTGAGE
- wndowment mortgage
- sndowment mortgage
- dndowment mortgage
- rndowment mortgage
- 4ndowment mortgage
- 3ndowment mortgage
- ebdowment mortgage
- emdowment mortgage
- ejdowment mortgage
- ehdowment mortgage
- ensowment mortgage
- enxowment mortgage
- encowment mortgage
- enfowment mortgage
- enrowment mortgage
- eneowment mortgage
- endiwment mortgage
- endkwment mortgage
- endlwment mortgage
- endpwment mortgage
Etymology of ENDOWMENT MORTGAGE
The word "endowment" is derived from the Latin word "indumentum", which means "vestment" or "garment". In the context of finance, an endowment refers to a sum of money or property that is given under the condition that it is invested to generate income. The word "mortgage" comes from the Old French word "mort gage", which translates to "dead pledge". This term refers to the pledge of property as security for a loan that becomes void when the debt is repaid or upon the lender's foreclosure. Therefore, the etymology of "endowment mortgage" combines the concept of an investment fund generating income with the security of the mortgage to create a specific type of financial arrangement.
Infographic
Add the infographic to your website:
