Interest Only Mortgages
With an Interest-Only Mortgage, you make one payment to the lender every month which consists of just the interest on the loan, and one payment into a suitable investment product or savings plan such as an ISA, an endowment or pension, designed to build up the capital required to repay the loan at the end of the term.
The interest payments will vary depending on the interest rate being charged by the lender at the time. This type of mortgage involves paying the lowest possible monthly outlay to the lender. If you are fortunate, the investment will accumulate at a higher rate than is required to pay back your loan on time, resulting in a cash surplus at the end of the term.
This is not always the case however, and sometimes there can be a cash deficit at the end of the term.
Click for more mortgage glossary terms relating to remortgaging.