What type of mortgages are there?
There are two basic species of mortgage, interest-only and repayment. The option you choose is determined by the way you want to repay your loan. Interest only An interest-only mortgage allows you to repay just the interest on your loan, but you have to take out an investment that will mature to pay off the outstanding amount. If your investment performs well then you may have some money left over after paying back your mortgage. But there is also a risk that the investment will under perform leaving you to make up any shortfall. The most popular investment for these kinds of mortgages used to be an endowment, but they have been hit by problems recently. Many people have found that poor returns on the stock market mean their endowments might not provide enough money to pay off the whole mortgage. Now only about six per cent of new interest only mortgages are backed by endowments. Other investments include Isas and pension plans. Repayment A repayment mortgage requires you to pay back b
