Savings mortgage often has two components, which might be difficult for some people to wrap their head around, because of the technicalities involved. However, you should also know that this kind of mortgage is not for everyone because it can become quite risky. However, the risk can pay off beautifully, which means that you can end up making a lot of money, ensuring that you end up saving loads of money, as well. There are two separate financial agreements that the individual will have to enter into. One would be taking out the mortgage with a ’lender‘ and the other one would be with an ’insurer‘ so that you take out an endowment policy.
An endowment policy is also known as a life insurance contract, which is taken out for a fixed period, which might often be up to 25 years depending upon the amount of money that you have invested in. You would be paying the premiums per annum which eventually then gather interest. If you are alive after 25 years, then the person who has taken out the insurance would get a wide variety of different benefits in the form of final bonus along with different bonuses. However, if you die before the term, then your beneficiaries get that amount. Sometimes, you might end up getting up an amount which is twice the amount that you invested in. Therefore, the lender of the mortgage considers the endowment policy as the perfect security as far as savings mortgage is considered.
In the savings mortgage on the other hand, only the interest is paid on the mortgage every month. This allows the individual to save the money there but make payment on the endowment policy instead. However, the mortgage has to be paid at the end of the term, which allows the creation of more cash-flow for the individual throughout the term.
However, you need to be careful of savings mortgage. You need to see if the economy is doing well. If there is economic crisis, the bonus will tend to be low which might end with you in a loss and paying more money than is worth. You need to get the right kind of advice before you opt for this kind of mortgage. Sometimes, it is always best to invest in your money in a savings account so that you end up getting fixed interest payments for a period of time. At least, you would have the peace of mind that you won’t be at risk. But if you are someone who likes making big amounts from a huge risk, then you can consider savings mortgage. However, do take impartial advice from someone who knows the market well