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Whats the difference between a repayment and an interest-only mortgage?

April 26, 2017difference interest-only mortgage repayment

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Whats the difference between a repayment and an interest-only mortgage?

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They are different ways of paying back a loan. If you choose a repayment mortgage you make monthly payments of capital (the lump sum you borrowed) and interest so that at the end of the mortgage period the loan has been completely repaid. An interest-only mortgage is linked to an investment, such as an Individual Savings Account (Isa) or an endowment policy. For the duration of the loan you pay a monthly interest payment on the mortgage itself and a monthly premium for the endowment policy. With an Isa mortgage, you pay a regular sum into the account, which is then invested. At the end of the term the Isa or endowment is used to repay the loan. If there is a surplus, it is yours to keep.