With an interest-only mortgage, your monthly payments pay only the interest charges but not the mortgage itself. You will be expected to make arrangements to pay off the mortgage at the end of the term.
If you haven’t already made arrangements to do this, you should think carefully about doing so now. Talk to your lender as soon as possible as they may be able to help. You may have decided to pay off the mortgage by putting money in an investment or savings plan such as an endowment policy, Individual Savings Account (ISA), or Personal Equity Plan (PEP), or you may decide to use money from a personal pension.
The investment, savings or pension plan will need to grow to give you enough money to pay off the mortgage at the end of the term. If it doesn’t, you’ll be left owing money. This is known as a shortfall.
Download our Guide here: dealing-with-your-mortgage-shortfall.pdf