Endowment Policy

Posted on 10 March 2011 by Freda Slevin

We have a mortgage that is part interest-only, part-repayment (initially it was all interest-only). The interest-only part has now been reduced to below the expected maturity value of an endowment policy due to mature next year. We have a second endowment policy, also currently linked to the mortgage, that we would like to surrender to release the cash for home improvements.

The problem is that our mortgage lender will not release the second endowment until the mortgage is paid off in full. We have never been made aware of this policy which I believe can into effect in January 2010.

Is the mortgage lender within its rights to hold on to the second endowment policy? The portion of the mortgage originally covered by the second endowment was converted to repayment some years ago.

If so, it would seem our only route to obtaining the monies from the second endowment would be to move the mortgage to a different lender.


Without a copy of your Mortgage Offer, terms and conditions booklet and any subsequent amendments I can only comment in very general terms.

It was common practise for endowment policies to be assigned to the Lender when taking an interest only mortgage. This effectively gave control of the policy to the Lender and made them the beneficiaries of any funds on early surrender or at maturity. Unless you applied for the release of the policy this sounds like it is still the case and your lender is just exercising their rights.

I believe you would benefit from speaking to one of our independent mortgage advisers about remortgaging. Please call on 0344 346 3672 and tell the consultant the date and title of your question. They will be able to look at your situation and advise you accordingly.


Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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