Different types of mortgage

There are broadly 5 different types of mortgage: 

1. Repayment mortgage - this is where the loan amount is repayable over a term (usually 25 years) by monthly instalments. Each monthly instalment will comprise part capital repayment and part interest payment. 

2. Endowment mortgage - these types of mortgage are linked to a life assurance policy which matures at the end of the mortgage term. The mortgage monthly repayments comprise the loan interest only. The capital repayment is made at the end of the mortgage term and is financed by the life assurance policy. However, the life assurance policy is not guaranteed to be enough to repay the capital. 

3. Pension mortgage - these types of mortgages are linked to a personal pension policy. The mortgage monthly repayment comprise the loan interest only. The capital repayment is made from the tax-free payment from the pension fund on retirement. 

4. ISA mortgage - these types of mortgages are linked to an ISA. The mortgage monthly repayment comprise the loan interest only. the capital repayment is made from the ISA. 

5. Interest-only mortgage - these mortgages are not linked to any other product. The mortgage monthly repayment comprise the loan interest only. Buyers need to find a method of paying off the capital at the end of the term.