Switching to repayment mortgage is the only way to guarantee that it will be paid at the end of the term

David Hollingworth of London & Country

Anyone who has taken out an endowment, Individual Savings Account (ISA) or Personal Equity Plan (Pep) to pay off their mortgage is being urged to review their investments in the light of recent events.

Tough times

About three million homeowners have endowment mortgages.

They have already been informed if their policy is not on track and, likely to have a shortfall, if it does not grow by more than 6% a year.

People who need their policies to grow between 4% and 6% have been reassured that they should be able to build up sufficient funds to pay off their mortgage.

However, insurers are only obliged to inform their investors every two years if they are on course to pay of their home loan.

Experts are now warning that if markets continue to fall, people may be forced to reassess their investments.

While the endowment fiasco has been well documented, there is also concern for people who are paying into equity Isas or Peps to pay off their mortgages since they are also relying on stock market performance.

Mortgage choice

If you take out an interest-only mortgage, you will pay only the mortgage interest each month.

To pay off the capital debt, you must build up sufficient funds to pay off this sum at the end of the term.

The most popular way of doing this is through an endowment, Isa or Pep.

What should I do?

If you have got an endowment, you should have been informed by your policy provider of the projected value of the fund.

If you have a Pep or Isa, there is no similar scheme but you should receive an annual statement outlining the fund's growth.

Some market analysts are predicting growth as little as between 1% and 2% this year, which falls far short of most projections.

If you have got a shortfall, you can either top up your existing policy, put money into a different investment, or switch part of the whole of your mortgage into a repayment deal.

Experts advise people to steer clear of topping up their policy or investing in another equity-based investment because of current market conditions.

Time to switch?

David Hollingworth of London & Country, a mortgage broker, said: "Switching to repayment mortgage is the only way to guarantee that it will be paid at the end of the term."

You do not need to switch all your mortgage into a repayment deal - only the shortfall if you wish.

The other advantage is that mortgage rates are so low.

This means that you may even save money, especially those people who are paying a high rate of interest.

For example, someone paying into a �100,000 interest-only mortgage at 6.5% who switches �20,000 into a repayment deal at 4.89% could save �84.89 each month.

They would also have the reassurance that the underlying capital was being paid off each month.