How would you begin your house-buying quest if you were so inclined? You thoroughly study a series of mortgage loans. And what kind of a mortgage loan would be most appropriate for you? That would be determined by how much you are hoping to get and on the rate of interest that you would be able to afford. Generally speaking, the greater the period of the loan, the lower will be the interest amount that you will have to shell out.

To the extent that we are talking of the mortgage types, there are two major types. On the one hand we have the repayment-only mortgages. On the other hand, we have the interest-only mortgages. Read on if you want a basic explanation of these two loan types.

Now, repayment-only mortgages consist of two types of repayments. When you decide on a repayment-only mortgage, you will be funding monthly installments of both capital and interest. Every so often you will get the feeling that you are shelling out a much greater amount than you would in other types of mortgages. Well, my advice to you would be not to worry too much about it. The only reason that you seem to be paying more is because you are seeing to not just the interest but also parts of the capital.

Let us now talk about interest-only loans. How does this work? Well, if you had been tracking the mortgage markets a few decades ago, you would have heard of the model of endowment mortgages. If you haven't the foggiest idea as to what endowment mortgages are, keep reading.

An endowment mortgage is a type of interest-only mortgage where the borrower has to make investments in an endowment fund or some other kind of life assurance policy. Thereafter, the borrower is required to settle only the interest that accrues on the mortgage. The capital is covered by the endowment fund. Of course, this has its bad points, for the fund's performance is manipulated by market conditions. In the case of the endowment mortgages in the United Kingdom, these flaws were revealed when the markets collapsed in the 1990s. Mortgagers became helpless victims as the performance of the funds suffered, leading to losses for all.

Endowment mortgages have still not recovered their past popularity. However, other kinds of more stable, interest-only mortgages are still employed occasionally. Which is the better idea -- to go in for a repayment or an interest-only mortgage? In my opinion, that is something that you are best placed to decide. Both types have their own profits and losses. Make an informed final decision after thoroughly studying the mortgage markets.