ISA Mortgages
With this type of interest-only mortgage, as well as paying interest to the lender, you pay into stocks and shares or individual savings account (ISA) to build up enough to pay off the mortgage at the end of the term.
ISA mortgages are risky because you're investing in shares. ISA mortgages involve a degree of investment risk, because you are investing in shares, and so are not suitable for everyone. If the stock market falls, the value of your ISA will fall with it.
There are no restrictions on withdrawing money from your ISA. So, if share prices are high near the end of your mortgage term, you could choose to protect the money you've built up by cashing in all or part of your ISA and reinvesting them in a lower-risk alternative.
ISAs are a tax-efficient way in which to invest in shares, unit trusts and other investments, because currently all the income and growth is completely tax-free.
The government has said that ISAs will be available until April 2009, but it is not known whether they will be extended beyond that date. If not, from then on, you will have to invest to repay your mortgage in a different way which may be less tax-efficient.
Since April 2004, dividends from shares and distributions from share-based unit trusts and OEICs in ISAs have become taxable inside the fund.
You need the self-discipline to ensure you pay steadily into the ISA in order to build up the sum you'll need to repay the mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
We can be paid by commission or a fee. The precise amount will depend on your circumstances but will be typically around £500
The Financial Services Authority does not regulate some forms of Mortgage.
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