Interest Only Mortgage

As the name suggests, payments are of interest only and therefore lower than a repayment mortgage. At the end of the mortgage term, usually 25 years or less, the full mortgage amount will still be owed.

The most important thing to remember is to have a repayment plan in place to repay the amount borrowed by or before the end of the term. There are three main types of repayment plan, endowment policies, ISAs or pension. Depending on the mortgage lender and product selected, you may also be able to make extra lump sum overpayments to reduce the outstanding amount.

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