With a savings mortgage or endowment-linked mortgage, your annual statement shows a debt figure that isn't your actual position.
At a €250,000 mortgage with €95,000 accrued in the linked policy, your real net debt is €155,000. That gap of nearly a hundred thousand sits in almost no single overview, because the mortgage debt and the policy are administered separately by two different parties.
How this mortgage type works
With a savings mortgage or endowment policy, you pay interest only on the full principal throughout the term. There's no repayment as with a standard repayment mortgage. Instead, you pay a separate premium into a savings or endowment policy, which clears the mortgage in one payment at the end of the term.
Two figures therefore coexist:
The mortgage debt. This appears on your annual statement from the lender and doesn't change during the term, except through extra repayments.
The accrued value in the policy. This appears on a separate statement from the insurer or bank running the policy, and grows every year.
Since 2013 these forms can no longer be newly arranged with their associated tax advantage. Existing policies from before that date continue under the old regime, which is exactly why millions of households still hold this structure.
The gap nobody sees
Set the two figures side by side and the picture changes entirely:
| Amount | |
|---|---|
| Mortgage debt (lender's statement) | €250,000 |
| Accrued value in the policy | €95,000 |
| Real net debt | €155,000 |
Anyone calculating their equity using only the mortgage debt understates their wealth by the full value of the policy. With this mortgage type that's often tens of thousands to a hundred thousand, exactly the kind of amount that appears in no ordinary overview.
How to calculate your equity normally is in the article on that. With a savings mortgage you must still deduct the policy from that, and that's the step most often skipped.
How the policy grows
The policy usually carries a guaranteed rate, often linked to the mortgage rate on that loan part.
| Guaranteed rate | After 10 years (starting €95,000) | Growth |
|---|---|---|
| 3.5% | €134,007 | €39,007 |
| 4.0% | €140,623 | €45,623 |
| 4.5% | €147,532 | €52,532 |
This is guaranteed growth, not an expected return as with investing. That makes the policy one of the few parts of your wealth with a fixed, predictable outcome.
The invisible mechanism: rate and policy move together
Here's something that makes savings mortgages hard to compare with other mortgage types.
With many savings mortgages, the guaranteed rate in the policy is tied to the rate on the mortgage itself. They move together.
At a low market rate: you borrow cheaply, but your policy also grows more slowly.
At a high market rate: you borrow expensively, but your policy also grows faster.
That partly offsets itself, and it's precisely why a simple comparison with "mortgage plus separate investing" doesn't map one-to-one. With an ordinary mortgage you benefit from a falling rate without a drawback elsewhere. With a savings mortgage, part of that benefit fades because your policy grows more slowly.
Cashing out early: less than it looks
Considering surrendering the policy, it's tempting to think you simply receive the accrued amount. That's often not the case.
| Amount | |
|---|---|
| Policy now | €95,000 |
| Value if held to end of term (15 years, 4%) | €171,090 |
Surrendering before the end of the term often means missing the remaining guaranteed growth, and surrender costs can apply. The outcome is then lower than the current accrued value plus expected growth would suggest.
Always request a concrete surrender value from your insurer before deciding. It can differ considerably from what a simple calculation would give.
Converting to another mortgage type
A frequently asked question, and the answer is rarely a simple yes or no.
Convert to a repayment mortgage and you pay interest and repayment going forward on the net amount, not the full original principal:
| Rate | Payment | |
|---|---|---|
| Savings mortgage: interest only on €250,000 | 4.5% | €938 (excl. policy premium) |
| Repayment on the €155,000 net debt, 15 years remaining | 4.5% | €1,186 |
That isn't a direct comparison, because the savings mortgage accrues guaranteed value through the policy, while a new repayment loan pays down at the rate then prevailing. What's better for you depends on:
The guaranteed rate in your policy. Above what a new mortgage would offer today, continuing is often more attractive.
The tax treatment of your specific policy. Older policies may carry a payout exemption that can lapse or change on conversion. That's tax territory with rules specific to each policy; have it assessed by your insurer or an adviser before converting anything.
Your remaining term. The shorter it is, the less there is to gain from converting, and the greater the risk that refinancing costs aren't recovered.
Why this is more than a detail
For the question this whole series tries to answer, namely how much wealth you have and how much you need, this isn't a side issue.
At a €250,000 savings mortgage with €95,000 in the policy, looking only at the mortgage debt makes you nearly a hundred thousand poorer on paper. That gap can be the difference between sitting under or over an LTV threshold, as set out in the article on loan to value, and it directly affects your total wealth in every FIRE calculation in this series.
How Gylder fits in
This is exactly the kind of position a manual overview breaks down on: two figures held by two different parties, only meaningful together.
Gylder models a savings mortgage as a separate loan part with its linked policy alongside, so your net debt is calculated automatically rather than requiring you to add two annual statements by hand each year. Your equity, your LTV and your total wealth are then calculated on your actual net position, not the gross figure that happens to sit on your mortgage statement.
What this doesn't tell you
Every policy has its own terms. The guaranteed rate, term and tax treatment vary by insurer and policy. The figures here are a worked example.
Tax treatment on payout falls outside this article. Older policies may carry exemptions that vary by situation and can lapse on changes. Look up the current rules for your policy.
Surrender costs aren't included. They vary by insurer and policy, and can considerably lower the surrender value.
This isn't advice. Converting, continuing or surrendering is a decision with long-term consequences. Have your own policy calculated by your insurer or an independent adviser.
Frequently asked questions
What's the difference between my mortgage debt and my real debt with a savings mortgage? Your mortgage debt is fixed on your statement. Your real net debt is that figure minus the accrued value in your policy, which appears on a separate statement from your insurer.
How much is my endowment policy worth? That's on your insurer's statement. Surrendering before the end of the term can mean the actual payout is lower than the accrued value, due to surrender costs and missed remaining growth.
Should I convert my savings mortgage to a repayment mortgage? That depends on the guaranteed rate in your policy, the tax treatment of your specific policy, and your remaining term. Have it calculated before converting anything.
Can I surrender my endowment policy? Often yes, but request a concrete surrender value first. It can be lower than the accrued value due to surrender costs and missed guaranteed growth.
Why do my mortgage rate and policy return move together? With many savings mortgages, the guaranteed policy rate is tied to the mortgage rate. That offsets part of the effect of rate changes, which is why comparing with an ordinary mortgage doesn't map one-to-one.