25 Apr 2024

Endowment mortgages… mis-selling and shortfalls

An interest only mortgage combined with a investment policy is called an endowment mortgage. Interest is paid to the mortgage lender on the sum you have borrowed and a monthly payment is also made to the endowment policy.
The premiums paid into the endowment policy are invested and over the years a capital sum is amassed which is used to pay off your mortgage when the term comes to an end.

Unfortunately, in many cases, the income from the endowment policy is insufficient to pay off the mortgage, which has led to accusations of mis-selling..

Shortfalls

The number of mortgages where the endowment policy is failing to pay off the sum borrowed runs into millions. If you are faced with a shortfall you will have to find another way of paying off  the balance of your mortgage.
At the time endowment policies were sold, many customers did not realise that you could end up with a shortfall, because they thought their policies were safe, and  guaranteed the settlement of their mortgage at the end of the term.

Are you faced with an endowment shortfall?

Over the years your endowment policy provider should have written to you reviewing the performance of your policy and highlighting whether it would pay off your loan. If you are concerned that there is, or maybe, a shortfall, don’t bury your head in the sand, take action immediately.

Mis-selling

Your mortgage provider could have mis-led you when selling the endowment policy or it could have been inappropriate for your needs at the time. The reasons why an endowment policy may not be suitable for you are numerous…….
Your financial advisor did not explain at the time of taking out the mortgage that the plan would invest on the stock market and the pay-out was therefore NOT guaranteed.

You were single and did not require the life cover element of the endowment and the salesman failed to make it clear you were paying for this cover  
The endowment matures after your retirement date and the salesman failed to make this clear to you OR told you that the policy would be worth enough at retirement to pay off your mortgage.  

Or if the salesman failed to conduct a proper fact find to discover whether you would have sufficient income in retirement to meet the mortgage and endowment payments.

The salesman persuaded you to cash in one endowment and take out another.  
The fees or charges involved were not fully explained to you

Are you the victim of a mis-sold endowment policy?

Compensation may be payable if you have been mis-sold an endowment policy. Before taking action you should ask yourself whether you have been badly advised. It is extremely important to remember that the reasons for your complaint are based upon the advice you were given and not the shortfall you have ended up with.
The other thing to remember is that you must act quickly. Your complaint must be lodged by a specific date, so make sure you do not run out of time.

Further Information

Numerous offers of compensation have been incorrectly calculated. If you are uncertain whether a mistake has been made on your compensation offer, it can be checked by using the calculator at exasoft.biz.

This calculator has been prepared by the company who have produced the package used to calculate compensation by the Law Society, the Financial Ombudsman Service, the Financial Services Compensation Scheme and over 95 per cent of the financial services industry. There is a charge of £52.20 for using the calculator.

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