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 need to 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 may leave the decision on repaying the mortgage 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.
When using an investment plan to repay the mortgage you should be aware that depending an investment performance the value of the investment plans may not be guaranteed and may not be sufficient to repay the mortgage at the end of the term and further arrangements may need to be made to cover any shortfall.
We do not normally charge a fee as we are usually paid by the lender. However you have the option to pay us a fee and receive any commission which we are paid by the lender. If you choose this option, we estimate that the fee will be £495.
Your home may be repossessed if you do not keep up repayments on your mortgage.