Mortgages can be paid back in two ways, either repayment or interest only.
With a repayment mortgage, your monthly payments to the lender go towards reducing the amount you owe as well as paying the interest they charge. So each month you're paying off a small part of your mortgage.
Interest only mortgages, as the name suggests, only pays the interest charges on your loan - you're not actually reducing the loan itself. This is why it's very important you arrange some other way to repay the loan at the end of the term; for example, through an investment or savings plan.
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