A letter from the mortgage company lands on the doormat and the temptation might be to ignore it. By next July about five million households will have received letters from the companies that sold them endowment mortgages. These letters will warn them that the endowment policy they took out will not be enough to pay off their mortgage. Many homeowners will then remember the words of the financial advisor, who extolled the virtues of the policy which would not only pay off their mortgage but leave them with a nice lump sum as well. With an interest-only mortgage such as an endowment mortgage, the monthly payments to the lender only cover the interest on the loan.
Borrowers make separate payments into a savings account.
This accrues into a lump sum which can be used at the end of the mortgage term to repay the amount you borrowed. Feeling trapped Problems arise when the lump sum isn't large enough to cover the mortgage, let alone pay out the surplus sum promised to some mortgage holders. Homeowners will feel trapped. If they cannot pay up, they are potentially at risk of losing their house. Many people may be entitled to compensation from banks, building societies and insurance companies.