Low cost endowment
The mortgage definition for Low cost endowment:
Designed to accumulate the sum needed to pay after a given period, usually for the purpose of paying off a mortgage. However there are no guarantees and investors may have to increase their premiums to build up enough to pay off their mortgage.
Full with profit endowmentFull with profit endowment
The most expensive endowment plan with the highest guaranteed returns. This type of endowment guarantees an annual growth and also to pay off the full loan at maturity which is the cause of the added expense. It also has built in life cover. The future growth of your investment is assumed to be at a certain rate, which determines the level of your premiums. The portion of your premium that is being invested is pooled with the premiums of other investors. Annual bonuses are added to the maturity value each year and are dependent on the performance of the investment fund. There is a possibility that the bonuses will take the maturity value above the level required to pay back the loan. This would result in a tax-free cash surplus, which you can spend on whatever tickles your fancy.
Low start endowmentLow start endowment
This is essentially the same as a low-cost endowment, but premiums begin at a lower level and gradually increase over a number of years - usually between five and ten. The initial premium can be significantly lower than the full premium, but never lower than half (which is a common starting point). Premiums may, for example, increase from 50% to 100% of the final value by 20% per year for 5 years or by 10% per year for ten years. This is another product designed to make it easier to budget over the first few years of home owning, when money is likely to be tighter for many people. As with most products that work this way, you generally have to pay for it in the long run.
Non profit endowmentNon profit endowment
This type of endowment guarantees repayment of the loan. There are no annual or final bonuses and you generally have no chance of a cash surplus on maturity. Essentially, there is no benefit other than life cover which is eaqual to the value of the mortgage you have ttaken out. This is seen as an inefficient method of saving the money to pay back and is therefore rarely recommended as a method of repaying a mortgage.
Further Suggestions Traded endowment policy (Tep)
Unit linked endowment
Unitised with profit endowment
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