Interest -Only

With an interest-only mortgage, your monthly repayment pays only the interest on your loan and does not repay any of the capital. The original amount you borrowed stays the same for the term of the mortgage. At the end of the term, you must repay the original loan in a lump sum. You may be able to do this by:
• taking out a pension policy or an endowment policy to repay the original loan. The policy may not grow enough in value to repay the loan.
• selling the property and using the proceeds to pay off the loan.
There is no guarantee that the value of your policy or the proceeds of your house sale will be enough to pay off your original mortgage at the end of the term, especially if house prices fall. So there is a risk that you could be left without enough money to pay off your mortgage, at a time if your life when you may be close to retirement.
This type of mortgage may not be available to all applicants. There are two main types of interest-only mortgage: a pension mortgage and an endowment mortgage.
Within all mortgage agreements lie the opportunity to negotiate different interest deals such tracker rates, roll-up rates, defined interest holiday periods etc.