An important consideration when choosing a mortgage is what type to go for. Although there are many different names used by mortgage providers nearly all mortgages can be put in one of two categories.

1. Repayment Mortgage (aka ‘Capital and Interest Mortgages’)  

This is the traditional type of mortgage whereby each repayment goes towards both paying off the interest and paying off some of the debt (known as the capital)
 
By the end of the mortgage term the entire loan will be repaid and you own the property.
 
The disadvantage of this type of loan is that the monthly payments will be higher meaning that the value of the property that you can afford to buy will be lower

2. Interest Only 

As the names suggests, only the interest is paid, while the size of the loan remains the same 

The monthly costs will be lower so you may be able to purchase a property that you would otherwise not be able to afford (as long as the mortgage provider agrees – see How much can I borrow for a mortgage)
 
However, by the end of mortgage term you will still owe the entire loan amount. You will then need to remortgage to continue borrowing the loan.
 
If you are unable to repay the loan at the end of the mortgage term (by remortgaging) the mortgage provider can take possession of your home, making this a riskier option.

 
An interest only mortgage also means that the total amount you pay for your loan will be higher as the total interest payments will be greater.

Which to choose 

When house prices were rising steadily the interest only option looked attractive as even if you were unable to remortgage at the end of the mortgage term you could always sell your property, pay off the loan and bank the profit.

However, the current volatility in house prices means that the interest only option now looks decidedly more risky as the failure to pay off any of the capital means you are likely to be in negative equity by the end of your mortgage term if property prices fall.
 
In addition, the possibility of a sharp rise in interest rates means you may struggle to find an interest only deal that is affordable at the end of your mortgage term, meaning that you struggle to remortgage and pay off the original loan.

In addition to the lower risk, a repayment mortgage will also be cheaper over the long term as your total interest payments will be lower.

Therefore it is always advisable to pick a repayment mortgage whenever possible. If you cannot afford the repayment option straight away at least make sure that switching from an interest only mortgage to repayment mortgage is a priority at the earliest opportunity.
 
Otherwise you are potentially storing up trouble for the future and paying more for your loan than you need to.