Mortgage Calculator	Best Mortgage Rates	Bad Credit Mortgages	Remortgage	First Time Buyers	Mortgage Brokers

House Buying Process

Insurance

Buy To Let Mortgages

Self Employed Mortgages

Lending Criteria

Mortgage Enquiry Form

Remortgage Enquiry Form

How Much Can I Borrow ?

16th December, 2011
Mortgages 2012 More Optimistic?

20th September, 2011
10% Rise in Number of Mortgages

7th June, 2011
Coppers Wife Charged With Mortgage Fraud

INTEREST ONLY MORTGAGE

Here at mortgagemap we aim to give you all the information you need on an interest only mortgage to help you decide if it's the right option for you.

So what is an Interest Only Mortgage?

Well if you borrow money then at some point you have to pay it back one way or another. While you owe money to the lender you will pay "interest" on the loan. Now normally when you make the repayments to the lender your payment is made up of two elements the Capital (a small portion of the original money borrowed) plus interest for borrowing it. With an Interest Only Mortgage you do not make a payment towards the capital debt being repaid, just the interest. This means that the monthly payments will be lower than a Capital and Interest (repayment) mortgage.

There is no such thing as an Interest Only Mortgage

The above statement is in fact true because at some point you will have to repay the loan either on death (life insurance policy) or when you sell the property. You are merely reducing payments and pushing back the date when you repay it.

When is an Interest Only Mortgage a sensible option?

Well people who have normal Capital & Interest repayment mortgages may need to switch to an interest only mortgage for a short period of time just to help them through a tricky spot. Say for instance when a borrower takes maternity leave or is made redundant. This financial difficulty may only be temporary so therefore a short term reduction in monthly repayments may be very useful. You should discuss this with your mortgage lender, they are often more helpful than you'd expect. Remember the last thing want to do is repossess your property, they are in the business of lending money not owning houses. It is never advisable though to switch without a definite plan of how and when you will switch back.

Interest Only For Buy To Let

An Interest Only Mortgage is more often than not used by property developers who buy lots of houses and flats merely to rent out. They have no incentive to repay the capital as they go along as it reduces there borrowing ability for future purchases. A lot of them just rent the house out for 10 or 20 years and then just sell them, using the sale money to repay the loan. If you own the house and live in it this is not an option as where are you going to live when you sell the house? Drawbacks to a repayment mortgage are that during the first five or six years you are not really reducing the capital debt by very much in any case as the interest is front loaded so if you know for a fact that you will be selling and moving after two or three years would you have reduced the outstanding debt by much in any case? Back in the 1980's loads of people went for an interest only mortgage option backed by an endowment policy which was designed to repay the debt at maturity though poor investment returns throughout the 90's meant that these one time popular policies were abandoned by many as a viable repayment option.

Our Mortgage Website is free to use with no obligation, if you would like to speak to a mortgage adviser or request a quote fill out the enquiry form and we will pass your details on.

* It is possible that some mortgage advisers charge fees, just ask the adviser when you speak to them and they can confirm any fees.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY LOAN SECURED ON IT.

© Founded 1999 MortgageMap.co.uk - All Rights Reserved - © 2012