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If you choose the interest only mortgage repayment option you will be required to make monthly payments that consist solely of the interest you accumulate each month. It is usually expected that you make separate monthly installments into a savings account to repay your mortgage loan upon maturity of your savings (investment vehicles may include ISA, Endowment, Pension scheme).
If you choose this repayment option you are guaranteed to pay off your mortgage loan within the set term established by your mortgage lender. Your monthly payments usually consist of the interest you owe each month as well as your standard monthly mortgage repayments.
Interest rate options
It is important to consider which interest rate deal is best for you in your current financial situation. Your mortgage loan can be tailored to suit your individual needs and you should consider a variety of options before seeking professional advice.
In the fixed rate mortgage deal, your lender may establish a fixed rate of interest that will end when the interest rate term ends. After this point, the lender will switch the rate of interest to their own standard variable rate, which they determine by considering the Bank of England base rate.
In a tracker rate mortgage deal your rate of interest will trace the Bank of England base rate and as such, it is unpredictable and you may find it difficult to manage your finances because of fluctuating rates of interest.
In a standard variable rate, your lender sets their own rate of interest and although this is likely to be based on economic factors such as the Bank of England base rate.
Check out our product comparison tables to see a range of mortgage deals from a number of different providers.