All mortgages have one thing in common – interest is charged on the amount you borrow.
With an interest-only mortgage, your monthly payments only cover the interest charged on the amount borrowed. There can be upsides and downsides to that, but we could help you decide if an interest-only mortgage might be right for you.
What is an interest only mortgage?
Interest only is a type of mortgage where your monthly mortgage payments only repay the interest and don’t go towards repaying the original amount borrowed. That means:
- your monthly mortgage repayments will be lower
- the capital element of your mortgage loan won’t reduce over time because it’s not being paid off
- you’ll be required to repay the entire capital balance of your mortgage in a lump sum at the end of the term
- you’ll need to agree a financial plan with your lender that shows how you intend to pay the lump sum at, or before, the end of your mortgage term.