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Interest Only Mortgage

A interest-only mortgage is one where you only pay the interest on the loan month by month, and still owe the lender the whole of original sum borrowed until the end of the mortgage.

Therefore, as well as a monthly payment to the lender, you make a second monthly payment into some sort of investment vehicle (such as an endowment, ISA, or pension). The idea is that at the end of the mortgage the investment vehicle contains a sufficient sum to pay off the original loan - possibly even a some left over.

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