Provided you have repaid the loan, this traditional type of mortgage remains the only way the property is actually guaranteed to be yours at the end of the mortgage term.
Your mortgage loan is divided into capital repayments (the money you borrowed) and interest payments (interest you’re being charged for the loan).
As you pay off your mortgage every month you’re actually paying off a portion of the capital loan. It may appear you are being charged more but unlike other types of mortgages you’re paying off the capital – not just the interest.
Interest Only Mortgage
An arrangement where you’re only paying off the interest on the loan.
None of your original capital loan is being directly repaid. You are expected to have made provision by setting up a separate investment fund into which simultaneous monthly payments are made to coincide with end of the mortgage term.
This type of mortgage is usually preferred by most investors as the repayments are cheaper allowing the property to stack up against the rental income and less money is tied up in the property.