Mortgages - How to repay your mortgage
There are two ways to repay the amount you have borrowed (the ‘capital’). Their advantages and disadvantages are described below.
Repayment mortgage (also called a capital-and interest loan)
Your monthly payments gradually pay off the amount you owe as well as paying the interest charged on the loan. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term.
Interest-only mortgage
Your monthly payments cover only the interest on the loan. They do not pay off any of the capital. You will need to arrange to pay separately into a savings or investment scheme to build up a lump sum to pay off the mortgage at the end of the term. See Step 8 How to repay your mortgage - Interest-only. It is your responsibility to make sure you have enough money to repay the mortgage at the end of the term, otherwise you could lose your home.
Which repayment method?
Advantages and disadvantages of repayment methods
Choosing a repayment vehicle for your interest only mortgage
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