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Last Updated: Monday, 16 July 2007, 14:07 GMT 15:07 UK

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Interest-only mortgages

With an interest-only mortgage your monthly payments only cover the interest on the loan - they do not pay off the loan itself.

So you will need to make separate arrangements to pay off the loan when the mortgage ends.

If you don't, you could lose your home.

You can make your arrangements through your lender - but you don't have to.

Useful checklists and information

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YOUR OPTIONS

Save regularly

You make payments into a savings or investment scheme each month to build up a lump sum to pay off the mortgage when the time comes.

The returns offered by bank or building society accounts are usually too low for them to be used to pay off the amount borrowed.

Instead, it is usual to accept some risk in the hope of a higher return by choosing schemes where returns are linked to the stock market.

But with these stock-market-linked schemes, there is no guarantee that your money will grow enough to pay off the mortgage in full by the end of the mortgage term.

Change to a repayment mortgage later

This might be a suitable option if, say, your earnings are low now but are expected to be much higher in future - for example, when you've just finished training or gained professional qualifications.

Using an interest-only mortgage keeps your monthly payments down until you can afford the higher monthly payments of a repayment mortgage.

But because you're not paying anything off the amount you owe, you will probably end up paying more interest in the long run.

Use a lump sum from somewhere else

For example, using an inheritance or selling something such as another property or a business.

This is usually a risky strategy - how sure are you that the inheritance will materialise; what happens if your business fails?

Sell the property to pay off the loan

This is suitable only if you won't need to live in the property - for example, if it is a buy-to-let property or a second home, or you are buying something cheaper.

REVIEWING YOUR PLANS

Whatever plans you make to repay your mortgage, remember to review them from time to time to make sure that they are still on track to repay the loan when the time comes - or you could lose your home.

GETTING HELP

If you would like help with planning how to repay your mortgage, you could think about talking to an adviser.

Useful checklists and information

Reviewing your mortgage

Tackling borrowing problems

Managing your borrowing

Getting information and advice

BBC Your Money guide: Mortgages and Housing

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Handy tools

BBC mortgage calculator

FSA comparative mortgage tables

The BBC is not responsible for the content of external internet sites

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Contact numbers and internet links

Financial Services Authority - Consumer Information
Information from the UK's financial services watchdog
Consumer helpline: 0845 606 1234 (call rates may vary)

FSA Money Made Clear

Association of British Insurers

www.abi.org.uk

Council of Mortgage Lenders

www.cml.org.uk

The BBC is not responsible for the content of external internet sites

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This checklist was developed jointly by the BBC and the Financial Services Authority (FSA), the UK watchdog for the financial services industry. It does not provide financial or other professional advice. If you want advice specifically tailored to your personal circumstances you should consult an adviser.

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PERSONAL FINANCE CHECKLISTS

How to get information and advice

Sorting out your budget

Tackling borrowing problems

Managing your borrowing

Protecting your dependants

Money in an emergency

Protecting your income

Tips for saving and investing

Income in retirement