Just like an ice cream. Interest Only Mortgages come in different flavors. However, it does not mean that one type is better than the other. When you purchase a home, mortgage lenders consider the home as an investment. Each type of Interest Only Mortgages depends on the repayment of the investment. Mortgage Lenders offer Pension Mortgages, Endowment Mortgages, and ISA mortgages which are the three types of Interest Only Mortgages.

Pension Interest Only Mortgages

This mortgage is a tax efficient way to purchase a real estate property. It works just like Endowment Interest Only Mortgages, but the contribution goes to the pension plan. Each mortgage payment goes to pay interest, pension, and insurance. As you make mortgage payment, the pension plan grows tax free until you retire. Then, you use the accumulated pension to pay off the principal.

Endowment Interest Only Mortgages

This mortgage was popular in UK during the eighties and nineties when the interest is high. Each mortgage payment goes to pay the interest, and insurance. In turn, the insurance company invests on stocks and shares. The insurance policy ends at the same time of the mortgage loan. And, the proceeds pay off the principal.

ISA Interest Only mortgages

ISA stands for Individual Savings Account. This mortgage is another tax efficient way to purchase a home. There is no tax on personal taxes and withdrawals. Each interest only mortgage payment goes to pay interest, and ISA. In ISA, you can choose where to invest your money, bonds, stocks, or life assurance. And, the payments are flexible. In times of tough financial crisis, you can limit or delay payments to the ISA.