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This is an arrangement where you're only paying off the interest on the loan.
None of your capital debt is being repaid directly. This is supposed to have been repaid by the end of the mortgage term by your having made simultaneous monthly payments into an investment fund.
The idea is that this fund has hopefully grown enough to pay off the capital and leave you with a surplus.
To do this your mortgage salesperson may offer you an investment "side" or "by product" (i.e. what they'll claim is a suitable type of investment to pay off the capital part of the mortgage).
Before accepting anything always shop around for others. (You're probably looking for some type of ISA.)
A typical arrangement might be an endowment mortgage - at least before they fell badly out of fashion.
In our view you'd be best off consulting an IFA. Make sure that s/he specialises in investments.
The majority of mortgage providers no longer ask for proof of an investment side/by product when confirming your mortgage.
You should be very clear that if the investment is not a success then you could lose your home - probably at the end of the mortgage term ie when you're close to retiring.
http://www.mortgagesorter.co.uk/types_mortgages_interest_only.html |
