Repayment Types
Repayment Mortgage
The monthly repayment you make to the lender each month consists of the interest you owe plus the capital. If you keep up all the repayments on your mortgage, you are guaranteed to have paid off the mortgage at the end of the term. This method is the safest way to repay the mortgage.
Interest-Only Mortgage
The payment you make to the mortgage lender each month comprises just the interest you owe for that month. Therefore you are not paying off any of the capital you owe. When considering this type of repayment, you should also consider making arrangements into a investment vehicle, savings account, pension or other investment. The aim is that the investment will then generate sufficient funds to pay off the capital sum you still owe at the end of the mortgage term. However, there is no guarantee of this, so any interest-only mortgage carries an element of risk.