Financial Information

1. Having an interest only mortgage will ensure that you just pay the interest that has accrued on your home loan each month, compared to a conventional repayment mortgage where you pay back part of the capital every single month alongside with the interest making sure that at the end of the term you will have paid back your mortgage totally.

2. The total capital amount (i.e. the amount you paid for your home) is still left at the end of an interest only mortgage term therefore it has to be paid by some alternative method.

3. For this particular reason interest only mortgages were in the past always sold along with a further product, such as an endowment plan, which is a product that you pay into once a month and which then invests that money in the stock market. Hopefully, when your mortgage has reached its end, your endowment policy will end up being worth enough to take care of the outstanding capital that you have to pay back.

4. If you cannot afford to make the higher monthly payments of a repayment mortgage an interest only mortgages can be a great way to get you on to the property ladder. After that, when are a little bit more economically safe you can change to a repayment mortgage and begin reducing the debt.

5. In places where property prices tend to be higher, interest only mortgages are worth taking into consideration simply because they may in fact turn out to be less expensive than renting.  Nevertheless, you should always try to either swap to a repayment mortgage the moment you can or make certain you have a further plan for paying back the capital at the end.

6. Interest only mortgages are also a good opportunity for individuals who are independantly employed or who have unpredictable salaries. In these instances the flexibility that comes along with an interest only mortgage can be very welcome.

7. Some loan companies are now offering the choice of taking out a part interest-only and part repayment mortgage. This allows you to gradually decrease the interest only aspect.

8. Interest only mortgages find favour with property investors as the interest payments are tax-deductible. They do not intend to actually live in the property, but, expect to gain from it either through an increase in its worth or by receiving rent of more than the interest payments and any other costs.

9. As you don’t pay off any of the capital during the course of the mortgage, an interest only mortgage will cost you more in the end as you are having to pay interest on the whole amount for the whole time. With a repayment mortgage your monthly payments are made up of a lot of interest and just a little capital repayment at the beginning but the equilibrium gradually changes until you are primarily paying back capital with not a lot of interest.

10. Lenders may ask for larger deposits as they think interest only mortgages are more risky than repayment ones. Also, they may charge a higher interest rate on interest only mortgages.