Interest Only Mortgage

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Jargon Buster

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Interest Only Mortgage

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With an interest only mortgage you pay only interest each month on the money you have borrowed.

This means, of course, that the debt will not reduce. Instead you pay off the whole mortgage amount in one go at the end of the term of years. In most cases the money to do this comes from the proceeds of a savings plan, i.e. an endowment, PEP, ISA or personal pension plan. In reality it can be a combination of any or all of these plus anything else, i.e. an inheritance, redundancy payout, sale of shares, etc.

The most important thing to remember about an interest only mortgage is that you have to set up a method repaying it!

Interest Only Mortgage

The 'pay-at-the-end' method.

 Your home may be repossessed if you do not keep up repayments on your mortgage

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