mortgages

[Ian Bogle]

Whats the difference between an interest only mortgage and an endowment mortgage

[Sammy Snake]

They are pretty much the same thing.

If you take out a 25 year mortgage for say, �100K then each month you only pay the interest on this sum.  At the same time as taking out the mortgage, you also take out some other form of investment (like an endowment policy, a pension etc) that will be designed to mature in 25 years for a minimum sum equal to the amount of your mortgage.  i.e �100,000.  Hopefully with some left over for you but possibly not, leaving you with an outstanding amount to pay.

This is what happened in the case of the endowment mis-selling thing that is going on at the moment.   Due to poor performance, many endowments are falling far short of the amount required to repay the original loan and threfore people are being left with sometimes huge shortfalls.