Interest Only Mortgages are, as the name suggests mortgages upon which only interest must be paid. Because the principal psalm needs to be repaid at the end of the mortgage periodit is usually necessary to have an investment vehicle run alongside the period of the mortgage. In the UK these were usually sold in the past as endowment mortgages. The idea was that a payment would be made on a monthly basis to an investment, insurance policy. These would acquire a surrender value, and at the end of the term. The theory was that there would be sufficient funds in the investment to redeem the mortgage. An alternative was to have a pension mortgage which involved offering as security to the lender the lump sum payable from a private investment pension. The problem of course is that the investment may not match the cost of the mortgage loan which means there would be a sum left outstanding at the end of the mortgage period, and you could lose your home.
When you buy a house with an interest only mortgage attached to an investment vehicle. It is usually possible to redeem the mortgage and keep the investment going to stop. There is no reason why, if you bought another house you could not keep the investment going and obtain say a fixed rate repayment mortgage instead on the new house
It is not usually sensible to obtain an investment vehicle in the hopes of playing off an interest only secured unsecured loan although may be possible in some circumstances, the Mortgage Mentor doesn't know anything about it. This is pure guesswork. Please obtain proper advice from a broker or independent financial adviser.
