MyFinances.co.uk
News feeds Free newsletter

All the latest personal finance news - helping you make the most of your money

Mortgage glossary

Interest only mortgages

An interest-only mortgage is a loan secured against the value of a property that is not designed to be paid off. Instead, each payment made by the holder of an interest-only mortgage covers the interest on the loan without reducing its value.

An interest-only mortgage has no set time limit and the borrower will have to keep paying interest until they are in a position to pay off the capital separately, for example when they sell their house or when an insurance policy matures.

An interest only mortgage is used best in a period of rising house prices, or when mortgage-holders can expect to be earning more in the future (i.e. for a young couple).

Interest only mortgages come in many different forms including lifetime trackers, fixed rate deals, and discounted rate deals.


Recommended ... 

Related articles 


Disclaimer:
myfinances.co.uk is not authorised to give advice under the Financial Services and Markets Act 2000.

Terms:
By using this site, you are deemed to have accepted our terms of use.

myfinances poll 

myfinances.co.uk is running a poll to get your thoughts on stamp duty and its possible suspension to boost the property market.