Interest Only

As the name suggest, within this type of mortgage, monthly payments to the lender consist of interest only. The original amount borrowed is repayable at the end of the loan and, traditionally, borrowers have tended to contribute to a With Profits Endowment Savings Plan in order to produce a lump sum to meet the outstanding loan. Any savings plan could in fact be utilized, with options such as ISAs offering valuable tax benefits.

The fact that the final repayment of the mortgage is dependent on the performance of a savings plan introduces the risk of insufficient funds being available to repay the mortgage at the end of the term. Because of this, interest only mortgages are generally only suitable for individuals who are prepared to entertain such risk.

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Mortgages Warning:
Your home is at risk if you do not keep up repayments on a mortgage or other loan secured upon it.