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With an interest-only mortgage, your monthly payments pay only the interest charges but not the mortgage itself. You will be expected to make arrangements to pay off the mortgage at the end of the term.

If you haven’t already made arrangements to do this, you should think carefully about doing so now. Talk to your lender as soon as possible as they may be able to help. You may have decided to pay off the mortgage by putting money in an investment or savings plan such as an endowment policy, Individual Savings Account (ISA), or Personal Equity Plan (PEP), or you may decide to use money from a personal pension.

The investment, savings or pension plan will need to grow to give you enough money to pay off the mortgage at the end of the term. If it doesn’t, you’ll be left owing money. This is known as a shortfall.

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If you’re having trouble making your mortgage repayments, contact your mortgage lender as soon as possible to discuss your difficulties.

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Insurance protects you against the unexpected. If you’re burgled, it can pay for you to replace the things that were taken. If you need medical treatment, it can pay for private healthcare, or it can replace some of your income if you can’t work. If you die unexpectedly, insurance can pay money to your family.

Of course, not all of these may happen, and only you can decide whether you’re willing or able to take the risk. If they do happen, you may have enough savings to be able to manage, but in case you don’t, insurance may help.

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