Another type of mortgage is an interest-only mortgage. With this type you only pay the interest due on the amount you borrowed each month, and repay the capital at the end of the mortgage term.
However, very few interest-only mortgages are now offered. If they are, it’s usually in special circumstances such as buy-to-let or if you’re in later life.
This is because many people who were offered interest-only mortgages in the past had no means of paying back the capital at the end of the term.
The mortgage lending rules on interest-only mortgages were tightened up in 2012. But many people took these mortgages out before then and are coming to the end of their mortgage term with no way of paying the mortgage back.
If you have an interest-only mortgage and can’t repay the capital, contact your lender as soon as possible to discuss your options. The sooner you do this before your mortgage comes to an end the better.