Understanding Interest Only Mortgages

Understanding Interest Only Mortgages



Understanding Interest Only Mortgages
There are currently around 6 million homeowners who have an​ interest only mortgage .​
This type of​ mortgage means that the​ monthly repayments that you​ make are just taken off the​ amount of​ interest that the​ mortgage accumulates .​
The capitol which you​ borrowed must be paid back when the​ mortgage has run its terms.
The interest only mortgage seems to​ be very popular with those who are house buying for the​ first time .​
Recent research showed that the​ amount of​ first time buyers taking out an​ interest only mortgage rose to​ 18% .​
The mortgage could be popular because the​ rates of​ interest are usually a​ lot lower than a​ repayment mortgage .​
Due to​ this it​ is​ the​ only type of​ mortgage that many starting out first time in​ buying can afford.
However while low rates of​ interest are a​ good thing the​ down side is​ that when the​ term of​ the​ mortgage comes to​ an​ end you​ will still owe the​ same amount of​ money that you​ started out owing .​
If you​ do not have a​ means of​ paying this then of​ course you​ would have to​ take out another loan.
Lenders have perhaps become a​ little lack with this type of​ loan because years ago you​ would have to​ be able to​ prove to​ them that you​ had means of​ repaying the​ capitol at​ the​ end of​ the​ mortgage .​
Today you​ can take out an​ interest only mortgage and having to​ find the​ capitol is​ only mentioned on​ the​ bottom of​ the​ mortgage agreement.
Ideally those taking out this type of​ mortgage should have some form of​ investment that they are able to​ fall back on​ and so use it​ to​ repay the​ capitol of​ the​ loan .​
While the​ interest only mortgage does give the​ cheapest rates of​ interest over the​ long term it​ is​ one of​ the​ dearest types of​ mortgage.
If you​ want to​ be sure that you​ can own your home at​ the​ end of​ the​ mortgage arraignment then you​ have to​ have a​ repayment mortgage,​ unless of​ course you​ already have the​ means by way of​ an​ ISA .​
This means that part of​ the​ monthly repayment goes towards the​ interest and the​ other part towards the​ capitol .​
If you​ have an​ interest only mortgage then you​ should consider changing a​ part of​ it​ to​ a​ repayment mortgage or​ start saving money in​ an​ ISA account.
If you​ want to​ check out the​ rates of​ interest that come with interest only mortgages then go with a​ specialist website .​
You can get several quotes together on​ one page which makes comparing quotes easy and quick .​
You also have to​ take into account the​ small print of​ any loan you​ are considering as​ this is​ where you​ can find the​ added costs .​
Costs such as​ set up fees can vary widely from lender to​ lender so it​ is​ worthwhile choosing a​ mortgage with low costs or​ costs that have been waivered .​
The small print can include valuation fees and a​ lump sum payment if​ you​ should want to​ switch mortgages within s certain time frame of​ taking out the​ mortgage.




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