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The Mortgage Advice Center is part of Anderson LLoydLLP which is directly authorised and regulated by the Financial Services Authority.

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Interest Only Mortgages

The borrower with an interest only mortgage only makes monthly payments consisting of interest. The capital amount stays the same throughout the mortgage term and is repaid in one sum at the end of the term. As a result monthly payments are lower than a repyment mortgage that is of a similar amount.

The mortgage is paid off at the end of the term by an investment vehicle. This investment should be taken in to account when the borrower evaluates their monthly outgoings. They will have to realise what amounts will be needed to put into a savings plan to pay off the mortgage at the end of the term. The main types of mortgage repayment vehicles are endowments, Individual Savings account (ISA) or a personal pension plan. Whichever plan is used it is essential to regularly review how the investment is performing to make sure that the target amount will be acheived. It is a long term saving plan and it is essential that payments are kept overwise the borrower may not be able to pay off the mortgage at the end of the term.

Interest Only Graph

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Think Carefully when securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.