Endowment Loan

Filed Under:
Dictionary Says

Definition of 'Endowment Loan'


A type of mortgage in which the borrower makes only interest payments on the mortgage, while payments that would have gone to repay the principal are instead funneled into an endowment fund. Under an endowment loan, the borrower does not repay the principal until the mortgage expires.

Investopedia Says

Investopedia explains 'Endowment Loan'


Endowment loans offer many incentives for borrowers, however, they can be riskier than traditional mortgages. When repaying an endowment loan, borrowers have a lower monthly payment, since no principal is being repaid. During good economic conditions, contributing to the endowment fund allows the borrower to earn interest on money that would have been repaid as principal.

The main risk with an endowment loan is derived from investing in the fund. Because no principal is repaid during the life of the mortgage, the borrower must rely on the investments performing well. If the fund loses value, the borrower could lose much of his or her investment in the endowment fund, but will still be required to pay the full mortgage amount.

comments powered by Disqus
Hot Definitions
  1. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  2. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
Trading Center