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| | Interest Only Mortgages
Money is lent on the basis of payback to the lender with interest. However the capital lent sum, without further provision, does not reduce. An interest only mortgage requires you to make monthly payments to the mortgage lender to cover the interest on the amount borrowed. It is neccesary to establish a separate long term investment plan that will accumulate enough funds to pay off the full loan amount in your planned period of time. With an interest only mortgage there is no repayment term since the mortgage is only payed off on adequate maturity of investment plan provisions. As such the interest-only mortgage continues at whatever rate agreement has been chosen until other funds are available to pay back the borrowed capital sum. The investment plan required to pay off the mortgage usually comes in one of three forms; an ISA (individual savings plan), a pension or an endowment. This investment does not have to be provided by the mortgage lender. Advantages
A pension mortgage is an interest only mortgage with an additional investment plan in the form of a personal pension. A personal pension is a stockmarket based investment that benefits from tax relief and tax free growth. A pension pays a tax free lump sum and a monthly taxed income on retirement. The lump sum is normally used to pay off the mortgage. Advantages
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