Interest Only Mortgages Explained

Interest Only Mortgage

Interest only mortgages requires you to make monthly payments to the mortgage lender in order to pay off the interest on the amount borrowed. In addition to the interest only mortgage you need to establish a separate long term repayment strategy.

This could include an investment plan, inheritance or disposing of the property in the future.

The investment plan required to pay off the mortgage usually comes in one of three forms; an ISA (individual savings plan), a pension or an endowment. This investment does not have to be provided by the mortgage lender.

Interest only mortgages can also be changed to a repayment mortgage in the future. This is becoming increasingly popular with first time buyers who find it hard initially to afford the mortgage payments. Several lenders are now actively offering interest only mortgages to first time buyers as a specially designed product. However many lenders offer the main mortgage products on an interest only basis. It is important to remember that taking an interest only mortgage with a view to changing to a repayment mortgage in the future may incur a small fee from you lender.

Pros and Cons of Interest only mortgages

Advantages

You can choose an 'investment vehicle' that is tax efficient.
If the investment growth rate exceeds those estimated at outset you may be able to pay off your mortgage early or receive a lump sum at the end of the repayment period, in addition to paying off your mortgage.

Disadvantages

No guarantee that you will have sufficient funds to pay off the mortgage at the end of the repayment period, as the investment could perform below that assumed at the start.
Your debt remains constant throughout the mortgage period.
Some forms of investment may incur a penalty fee if you stop paying premiums.

Discounted Interest Only Mortgage Protection Insurance

On interest only mortgage protection insurance cover, critical illness insurance cover and permanent health insurance cover Go Direct rebate a minimum 50% of the initial commission that the provider would have paid to us back into your policy reducing the cost of your monthly insurance premiums. Get an instant interest only mortgage protection quote today from Go Direct life insurance.

Do you want fee free Interest only mortgage advice?

For Interest only mortgage or remortgage advise please feel free to contact us for independent mortgage advice from a professional mortgage advisor.

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We normally do not charge a fee for mortgage advice, however a fee paying option is available. Our typical fee would be £500

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP
REPAYMENTS ON YOUR MORTGAGE

Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.

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We normally do not charge a fee for mortgage advice, however a fee paying option is available. Our typical fee would be £500

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