Interest Only
An Interest Only Mortgage is one whereby your monthly payments consist solely of interest payment and not any capital repayment element. Therefore, with an Interest Only Mortgage, the amount you pay per month is lower than an equivalent capital and interest repayment mortgage, BUT the balance of your mortgage will remain the same, and will not be reduced by your monthly payments. i.e. if you borrow £100,000 and pay interest only over 25 years, you will still owe £100,000 after 25 years of payments.
If you decide to take out an Interest Only Mortgage, you must consider how the mortgage will be repaid at the end of the term. Interest only mortgages should be supported by a suitable 'repayment vehicle', so that the mortgage balance may be paid off in full at the end of the term. Please speak to your mortgage adviser for further details.
Interest only mortgages are not suitable for all borrowers. Borrowers MUST be aware that if / when switching from interest only to capital and interest repayment, monthly payments will increase. There is also an increased risk of a negative equity situation occurring should the loan to value be high and house prices fall. You must also understand that there will be more interest payable than if you started on a repayment only to begin with. It is important to ask for detailed advice on interest only mortgages from a qualified and regulated adviser.
- Telephone: 01443 209 436
- Fax: 01443 841 723
- Address: Suite 7, Greenword Drive, Llantwit Fardre, Nr. Cardiff, CF38 2LJ
- info@mortagefinancial.co.uk
