With this type of mortgage, only the interest is paid off with each mortgage payment.

The borrower also takes out, at the same time, an alternative 'repayment vehicle' (method of paying off the mortgage) such as an ISA, Pension Plan or an Endowment Policy (which in the 1980's and 1990's were extremely popular).

The most important fact about an interest only mortgage is that the monthly repayments do not repay any of the outstanding capital balance.

As a consequence it is important that the payments are maintained into the repayment vehicle otherwise it will not be possible to pay off the mortgage at the end of the term.

For more information about Interest Only Mortgages, contact one of our independent advisers.