A mortgage is typically a loan taken in lieu of some property that you own. Many schemes of mortgages are available in the market today. One of them is known as endowment mortgage. An endowment mortgage is one where the mortgage is arranged based on the interest. Here the capital is repaid by one or more endowment policies. Though not a legal term, it is widely used and accepted by lenders as well as consumers.
The big question here is, why should one go for a mortgage scheme that is not even legal. The answer lies in a very famous saying, "everything is fair in love and war". What happens is that the customer is required to pay only the interest on the capital borrowed and thus save money. Unlike other mortgages, the borrower makes payments not to the lender but on the endowment policy, which the lender credits to the borrowers name. Thus, both the parties gain in such circumstances and hence the flow towards endowment mortgage.
An endowment policy is like an investment, which gives enough returns to repay the borrowed amount. It is so effective a scheme that more and more people prefer to go for endowment policies than any other mortgage scheme available. There is always a sense of risk involved in it as the dealings are not completely legal in nature, but mortgage has always been a trust game. People who are not financially sound at the moment are tempted to go for it. Another benefit is that endowment policies provide you with a tax benefit, thus people in the middle-income group, in order to save tax, put their money into endowment policies. It not only helps them get tax rebate but also they can earn extra income from the policy returns.
Every coin has two sides and endowment mortgages are no different. The underlying truth of endowment policies is that the rate of growth in the investment will exceed the rate of interest charged. But, this may not be true all the times. Thus, it can put you in a state of trouble. Hence people are a little sceptical about going for endowment mortgages. There was once a time where it was almost seen as a taboo and a very untrustworthy product.
Today's world has changed dramatically and has given a fair chance of survival to everybody. This includes the endowment policies as well. People slowly started believing in them once again as it is a risky yet lucrative business proposition. The markets have grown rapidly and the demand for such mortgages has seen a rapid increase in number. Backed by financial institutions, endowment policies have managed to gain some respect. They are now seen as low investment high return policies, thus more and more people are tilting towards endowment mortgages for building their dream homes. It is the one stop shop for all their financial needs. |
