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Saturday, April 28, 2007

Innovative mortgage

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It is important to first understand what endowment mortgages are.

This is where the principle of the loan is covered by a type of insurance known as an endowment policy. The endowment policy ensures the mortgage holder will be able to pay off the loan when it comes due. Thus the only thing that remains due is the interest on the loan.

This is a very clever and innovative approach to mortgages that enabled many people to own houses in the 60s and 70s. However in recent times, due to various reasons, endowment mortgages have not quite worked and people who take out such mortgages have not been able to pay off what is owed. In many cases it is just a question of the seller being able to find the right buyer for their unique endowments policy.

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