Mortgages From The Past And The Present

Posted by Nick Niesen on October 29th, 2010

There are mortgages and there are mortgages. If you want to buy a house, it is likely that you will be flooded with offers from all kinds of finance companies and loan providers as they try to win you over. Each loan provider will advertise to you, the best possible loans that they have on offer. If you are looking for cheap mortgages, just relax. Most loan providers have an array of loans and mortgages to suit the house buyer on a budget.

These days it is hardly possible to fund all our necessities directly from our savings. Loan providers understand that and are willing to provide you with the ideal mortgage offer. Over the years we have seen various developments in the world of personal and housing finance. One popular development that had emerged some time ago in the United Kingdom was the endowment mortgage.

Although endowment mortgages are relatively unpopular now, there was a time when people thought it was a great bargain. Endowment mortgages allowed people to pay only the loan amount every month. How would this benefit the mortgage company? When taking out an endowment mortgage, the borrower was required to take out a life assurance policy for the period of the loan. These mortgages involved long term commitment and the duration was usually about twenty-five years. How did this help? The interest-only policy allowed the borrower to save up enough to repay the loan. However, if he was unable to do so, the life assurance policy that he had taken out would help foot the bill.

Sounds very convenient doesn't it? However, there was one tiny glitch. Now, the repayment of the loan would depend on the endowment funds. Thus, it became necessary that the funds into which the investments were made should perform well. However, one can never say when things will start going wrong.

After the initial popularity of endowment mortgages in a flourishing market where people actually got bonuses over and above their investment, there was bound to be a shift. A major shift came in the early 1990s, when the UK markets plunged into recession. There was a major market collapse which adversely affected many endowments. The crisis was so bad that companies had to revert to repayment mortgages.

Endowment mortgages have never again regained their popularity. And why should they? After all, the markets are flooded with all kinds of attractive loans. Figure out what kind of a loan you are looking for, and get ready to be bombarded by all sorts of offers.