The repayments are evened out over the term of the loan and as long as repayments are made, this type of mortgage is guaranteed to be repaid at the end of the term. It is also the most popular type of mortgage. This is one of the latest mortgage options available in the market particularly with certain Scottish banks. Simply, no capital is repaid and you only pay interest on a monthly basis on the amount that you borrowed. However you have the choice of repayment method.
Life cover here is mandatory on home loans.
A lot of the lenders are now following this trend. This used to be called the endowment mortgage. No capital is repaid on this type of loan until the end of the term while interest on the loan is paid on a monthly basis. However, the fund values can fall as well as rise and there is no guarantee that there will be enough in the fund on maturity to repay the original sum borrowed. This type of mortgage is popular in particular with commercial borrowings where tax relief on the interest paid on such loans is still available.