Endowment mortgage shortfall

Question: I have an endowment mortgage on my home and the 20 year term will be up shortly.  However it looks like there is going to be a shortfall in my endowment fund and there will not be enough to repay the original capital.  Is there anything I can do?

Answer:  Endowment mortgages were particularly popular in the late 1980s and early 1990s and were often sold with the promise that not alone would the capital sum of the mortgage be repaid when the term was up but that there would be a bonus payment to you as well!  A traditional mortgage is redeemed by paying both capital and interest every month.  An endowment mortgage is different as you pay only the interest every month and the other part of your monthly payment goes into an investment fund.  While these investment funds did well initially in the 90s you will not be surprised to learn that many of them have lost money in the last few years.  It can therefore come as a considerable shock to a borrower to find that not alone are you not getting the bonus payment you expected but that there actually is a shortfall in the amount available to repay the capital on the mortgage and that you have to make up the difference.

If you can show that the risks associated with this type of mortgage were not clearly explained to you at the time you took it out, it is possible that you may have a claim against the bank.  Earlier this year the Circuit Court awarded two pensioners €16,000 damages against a bank for negligent misrepresentation in the recommendation of an endowment mortgage.  The decision was largely based on the absence of any written warning from the bank and it may well be worth looking at what documentation was furnished to you at the time you took out your loan.  It should also be noted that this Circuit Court decision is under appeal.

The information contained in this article is for general information purposes only and does not constitute legal or other professional advice.  Specific legal advice should be sought on any particular matter.

The information contained in this article is for general information purposes only and does not constitute legal or other professional advice.  Specific legal advice should be sought on any particular matter.

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