Interest Only Mortgage
Your repayment is based on the interest of the loan only and the outstanding amount
is not repaid until the end of the term of the mortgage.
Monthly repayments normally consist of Interest on the amount borrowed, Life Assurance
and Contribution to an Investment Plan (an Endowment or similar) which is designed
(although not guaranteed) to pay off the outstanding capital at the end of the mortgage
Traditionally, monthly payments on Interest only mortgages are lower than a repayment
mortgage but you also have to consider the cost of the Investment Plan in your monthly
NB: As noted earlier, the risk with this type of mortgage is that
there is no guarantee that the Investment Plan you choose will yield adequate capital
to enable you to pay off the outstanding debt at the end of the mortgage term.
It must be noted that YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS
ON YOUR MORTGAGE.