Interest Only Mortgages
With this type of mortgage, the repayments consist entirely of interest on the mortgage loan.
At the end of the agreed term, the borrower repays the capital as a lump sum.
The borrower must invest in a 'savings vehicle', which will provide the required lump sum at the end of the mortgage term.
The savings vehicle available to meet this include:
- the tax-free lump sum from personal pension schemes
- ISA or unit trust savings plans
- an endowment insurance policy.