Interest Only Mortgage – also known as Endowment or Pension Mortgage
The popularity of this type of mortgage has reduced considerably over the past few years. With this type of mortgage you only pay the interest due each month on the amount borrowed. This means that you will still owe the same amount you borrowed at the end of the mortgage term as you did when the mortgage started. You will therefore need to have made separate arrangements to repay this balance at the end of the term.
Typically this type of mortgage requires you to set up a separate repayment vehicle alongside the monthly mortgage interest payments, such as an endowment or a similar savings/investment based product, or even a pension. However, many consumers have found that their endowment or other repayment vehicle have not performed as they originally believed they would, or they may even have cancelled these arrangements. Therefore they will find themselves short of funds to repay the mortgage balance at the end of the term.
If you are in this position you need to seek advice sooner rather than later. If you do not then the lender can demand repayment of the outstanding mortgage debt at the end of the originally agreed term and start proceedings against you to recover their money.