How do I repay the amount borrowed?

How do I repay the amount borrowed?

It's best to have a plan as to how you'll do this when you take out the mortgage. You could, for example, consider monthly payments into an Isa, which - if invested sensibly - should grow by enough over the term of the mortgage to repay it.

However, there are no guarantees this will happen, whereas with a repayment mortgage, you know that as long as you keep up payments, your mortgage will be paid off at the end of the term.

However, if you've got an interest-only loan, remember that once the mortgage matures you'll still have to pay back the original amount you borrowed.

Interest only mortgages were very popular in the 1980s and 1990s and huge numbers of investment schemes were set up to pay off these loans. The most common scheme was an endowment. Endowments provided an investment which included an element of life cover so the debt would be covered in the event of death before the end of the term. They also appealed for their tax-free premiums (the tax incentives no longer apply) and a bonus on maturity.

Their shortcoming however, lay in dependence on volatile stock markets and inflation and it is thought that as many as five million endowments were sold which will not be sufficient to cover the related mortgage at the end of the term.