There are several types of interest only mortgages, ISA (Individual Savings Account) mortgages being one of them. These mortgages are based on stock market investments and build up a capital lump sum that at the end of the mortgages term is used to pay it off. You can pay off these mortgages early though if you wish. Your debt remains the same throughout the term of the mortgage, you are only paying off interest and investing. These mortgages are great for higher rate taxpayers because they are tax efficient and the interest earned is tax-free.

These mortgages are gaining popularity in the United Kingdom. They are even gaining over endowment mortgages. Endowment mortgages do not offer any life-assurance coverage. ISA (Individual Savings Account) funds are not taxed, there by making the mortgage tax efficient and flexible. You can start and stop payments to the ISA (Individual Savings Account) part of the mortgage as you wish. There is a small risk that the ISA (Individual Savings Account) may not grow enough to pay off the loan at the end of the term but being able to add cash to this can help. ISA (Individual Savings Account) mortgages are based on stock-market type money investment so is, therefore, not always reliable. There are annual limits to what you can add to an ISA (Individualized Savings Account) though. If your mortgage is exceptionally large it may not be enough to repay the loan at the end of the mortgage term. Sometimes it’s better to think about one of the other interest only mortgage accounts available.

These mortgages are a great way to invest because the interest from them is tax-free. The charges for ISA mortgages are lower than for endowment mortgages. If an ISA mortgage investment performs well over the term you can pay off the mortgage early or enjoy an even larger lump sum payment at the end of the term. This is something that, for example, Pension Mortgages can’t do. You cannot payoff a Pension Mortgagee early under any circumstances. ISA (Individual Savings Account) mortgages can be customized to meet your needs.

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