This means that your monthly instalments will cover only the interest you owe on the loan. Normally you will need to make arrangements to repay the capital from your other resources or set up a savings plan to cover the repayment in the future.
Plus Points: Keeps your instalments low and gives you the flexibility to invest in a range of savings plans, some of which can have tax advantages (e.g. Individual Savings Accounts (ISA's) or Pensions).
Points to Watch: As no repayment of capital is included in the monthly instalments you will need to make provision for this. There is no guarantee that your investment or savings plan will cover the mortgage repayment when it becomes due. You will need to monitor this carefully and increase your savings early if required.
Standard investment or savings plans are offered as options to repay the capital on an Interest Only Mortgages:
