Repayment (capital and interest) mortgages  Under a repayment  mortgage your monthly repayments consist of both interest and capital  hence, over time, the amount of money you actually owe will decrease. In  the early years your repayments will be mainly interest and therefore the  capital outstanding will reduce slowly during this period.  Interest only mortgages  As their name suggests, with an interest only mortgage you only repay the interest on the mortgage. At the end of the term the capital is still outstanding. Therefore you will usually need to take out some kind of investment policy to save up enough money to repay the mortgage at the end of the term. Traditionally the preferred product for repaying the capital of an interest only mortgage was a mortgage endowment policy (which included a set amount of life cover) – although more recently customers are using Individual Savings Accounts (ISAs) and pensions to build up a sufficient sum and taking advantage of the tax breaks offered by these products. Interest rate types Mortgages Payment methods YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE The Financial Services Authority does not regulate some forms of mortgages