Buying a property can be the biggest decision made in our lives. It is for this very reason that it is critical to obtain impartial advice from qualified advisers.
Interest Only Mortgage
Interest only mortgages are a type of mortgage where only the interest is repaid. The full capital amount remains outstanding during the mortgage term and is repaid in one lump sum at the end of the term.
Lenders require evidence that a customer will have in place a clear credible repayment strategy and that the repayment strategy has the potential to repay the capital borrowed.
Repayment strategies may include deposits or investment product(s), pension(s), periodic repayment of capital from irregular sources of income (i.e. bonuses), the sale of another property or land or other acceptable methods which meet lending criteria.
This means that the mortgage payments each month will be lower than of those of a repayment mortgage for a similar loan and term. Where the repayment of capital is an investment the investment runs alongside the mortgage but is separate from it; the cost should be taken into account when calculating the costs of the mortgage arrangement.
Every month, you then pay this interest to the lender for the duration of the loan. The lender calculates your monthly repayments depending upon how the rate you have chosen is set. The monthly interest payments may vary dependent on whether the interest rate is fixed or variable. At the end of the loan period, the lender will expect the initial capital they lend you to be repaid in full by whatever means you have arranged.
A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.