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Regardless of the type of deal you go for - you can opt for either an interest only, or repayment mortgage. The fundamental difference between the two is reasonably obvious; with the former you pay back only the interest accruing, whereas with the latter you repay a portion of the capital with each monthly payment. Both have advantages and disadvantages.
As stated above, a repayment mortgage has two elements to it - one is the interest owed and the second is some capital repayment. This means your monthly mortgage bill will be higher but you will own you own home at the end of the mortgage term, providing you maintain your payments. If you can afford it, a repayment mortgage is a more straightforward and less risky option than an interest-only product, but the monthly repayments will be higher and penalties for missing payments may be severe. You should be wary of committing to an interest-only mortgage unless you are confident you can meet the repayments.
Repayments on an interest-only mortgage will only cover the interest which has accrued for that month. As a result when the mortgage term ends you will not have repaid any of the capital you owe and hence you will not own any more of the property outright than you did when you first bought it.
Interest-only mortgages may be ideal for you in one of two situations; firstly if you cannot afford a full repayment mortgage, then an interest-only mortgage will entail lower monthly payments; you could subsequently shift to a repayment mortgage if your income or financial situation increased somewhat. Secondly if you feel confident that you can use the money saved on monthly payments to invest into a savings plan which will give you a good enough return to pay back the capital owed at the end of the mortgage term. You can do this in one of three ways - using an ISA (which is an Individual Savings Account), an endowment policy or a pension.
The savings plan you put in place should be designed to provide enough money to pay off the capital - and, if the stock market performs well, you could end up with some extra money after you've paid the loan off. The issue is of course that the savings plan may not meet expectations and you may end up with a shortfall between the value of your savings and the amount you owe to own your house. In these circumstances you will need to find the money from alternative sources.