Interest Only mortgage

Interest only - Only interest is paid to the lender therefore the amount owed on the mortgage remains the same. Usually an investment plan is linked to the mortgage such as an ISA or endowment policy which aims to repay the mortgage at the end of the term. The plan usually has built in life cover and is portable from one house to the next one, however the amount of investment return is not guaranteed. This means that this type of mortgage has an element of risk involved in that there may not be sufficient money in your savings to pay off the whole mortgage at the end of the mortgage term.

Some lenders do allow you to have an interest only mortgage without a savings vehicle attached but it is always your responsibility to ensure that there is sufficient means to repay the mortgage at the end of the term.