When talking about home loan mortgage rates, the majority of people prefer endowment mortgages. Endowment mortgages are different from capital repayment mortgages because the capital is not repaid gradually year by year, but is paid back all at once at the end of the mortgage term. To make sure that you will be able to pay it back at the end, you take out an endowment policy with a life insurance company.

In return for your monthly payment of insurance premiums, the life insurance company agrees to pay the lender a lump sum at the end of your loan or at your death, if this is earlier. You pay interest on the loan and your insurance premium each month. But since you do not repay any of the money until the end of the term, the interest will remain the same each year. Your payments will only change if the interest rate rises or falls.

There are three different kinds of endowment life policies, which can be used to repay a mortgage. In a guaranteed or non-profit endowment policy, the life insurance company agrees to pay the amount of money you borrowed at the end of the term (or on your death, if you die before then) and does no more than that. This policy probably offers the worst value for money.

Secondly there is the with-profits endowment. The life insurance company agrees to do two things here. First, it will repay at the end of the term the money you borrowed, and it will give you some extra money, which it calls profits or dividends. You will have to pay higher premiums to get this extra sum. There is a low-cost or build-up endowment. This is where you take out a with profits policy for less than the amount you borrowed.