Interest only
Don't you mean endowment mortgage?
For many people, interest only mortgages are called 'endowment mortgages' or even 'pension mortgages', but strictly speaking these names describe an interest only mortgage plus the method by which it is repaid. In other words, an endowment mortgage is an interest only loan that is repaid by the proceeds of an endowment policy etc.
How they Work
An interest only mortgage is where the lender (a bank or building society usually) only charges you interest on the loan you've agreed. You don't pay the capital back until the end of the mortgage. The lender will usually ask you at the outset to provide an investment plan of one type or another to repay the loan at the end of the term, such as an endowment policy or ISA savings plan, but sometimes they will leave the repayment plan entirely up to you.
Every month, you then pay this interest to the lender for the duration of the loan. The lender calculates your monthly repayments depending upon how the rate you have chosen is set. At the end of the loan period, the lender will expect the initial capital they lend you to be repaid in full by whatever means you have arranged.
It is important to note that if you arrange to repay your mortgage using an investment vehicle, then dependent on its performance it is possible you may have insufficient funds to repay the liability at the end of the term. Also, because no capital is repaid throughout the term of the loan, the interest payments are based on the full borrowing for the full term of the loan.
We accept remuneration on a fee basis and/or a commission basis. This will be agreed with you at the outset. We would normally charge a standard £ 300.00 for our services, this will be waived if a life assurance, critical illness, income protection or similar policy is arranged where the commission value is £ 300.00 or more. If we agree to work on a fee basis in place of, or together with commission, we will provide you with a separate fee agreement confirming our charges and any related expenses before carrying out any chargeable work. Details for the payment of our fees are confirmed in the fee agreement.
We reserve the right to charge you a fee, without the need for a separate fee agreement, if you subsequently cease to pay premiums on any policies we arrange for you. This could apply for a period of up to four years and will reduce pro rata in line with the commission we are obliged to return to the Product Provider. The maximum amount of the fee will be no more than the amount of commission disclosed in the illustration.
Your home may be repossessed if you do not keep up repayments on your mortgage.