Yes, with a UK interest only mortgage you've got to consider how you're going to pay the capital at the end of the term!
The monthly repayment to the lender covers only one thing - the interest, for the mortgage loan, nothing else. The capital outstanding is still there at the end, just as it was when you first took out the mortgage loan.
So, don't just forget about it, or put it in the financial drawer marked "Problems to take care off in 25 years time"!
In other words, you (the borrower) have the responsibility to pay the amount borrowed (the capital) at the end of the term.
No problem, providing you've a nice little inheritance waiting.
But for the rest of us, the usual way to pay off the capital is through making regular payments towards a savings scheme (investment vehicle) of some kind.
Typical schemes include endowment assurances, individual savings accounts (ISAs), or personal pension or stakeholder pension plans.
But GET ADVICE! Because the downside is that if the rate of return expected is not realised, you could be facing a shortfall. In other words, the 'investment vehicle' has not returned sufficient to pay off the capital fully at the end of the term. So beware!
