Interest Only Mortgages

An interest only mortgage is a loan on which you pay no more than the interest charged. In effect you are merely servicing the debt not reducing it. The amount you owe remains constant.

If you have an interest only mortgage the onus is on you to arrange how to repay the capital at the end of the mortgage term. Most borrowers with these types of loan take out some kind of long-term savings plan such as an endowment policy or Individual Savings Account.

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2009-02-17 00:00:00 © Moneyextra.com