Interest Only Mortgages

With interest only mortgages only the interest and none of the capital is paid with each monthly mortgage payment.

The capital balance does not reduce.

There are a number of ways to repay the capital balance, traditionally from the proceeds of an endowment policy, ISA's or another form of savings or from the tax free cash from a pension fund.

In certain circumstances a lender will allow a pure interest only mortgage with no specific repayment vehicle where you rely on the equity in your property to repay the capital.