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Repayment or Interest Only Mortgage
You may arrange your mortgage on a 'repayment' basis or on an 'interest-only' basis, or on a 'combined' basis (i.e. some repayment and some interest-only). With a repayment mortgage each monthly payment you make to the lender includes some interest and some of the capital you have borrowed so that by the end of the term you will have repaid your mortgage in full. With an interest-only mortgage all you pay to the lender each month is interest (hence interest-only) so it is usual to have some form of separate savings plan to repay the capital amount borrowed at the end of the term, such as an endowment policy or Individual Savings Account (ISA).
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