Interest Only

As interest only mortgages imply, you only pay off the interest and nothing towards the actual mortgage you took out in the first place. Repayments are lower, but, it is crucial that arrangements are taken for you to pay off the loan at the end of term e.g through the means of a savings plan or an investment.image of a see saw with a house balanced at one end and a percentage sign at the other

If you go with an interest only mortgage, you have to be sure that your investment or savings plan grows as such that at the end of term you have money enough to pay off the original loan. If your savings or investment plan does not go as planned, you will end up with a shortfall, and you will have to come up with a way to repay this debt.

This type of mortgage have grown more popular recently due to the actual nature of the mortgage, mainly among buy-to-let and first time buyers. Put simply, they are a cheaper way to own a home.

Concerns have risen though, that customers do not give enough consideration as to how to repay the debt at the end of term.