Interest Only Mortgages

Considering an interest only mortgage?  This type of mortgage is cheaper than a repayment or part and part mortgage because you are not repaying any of the capital that you borrowed.  Whilst there are rare occasions where this type of mortgage can be advantageous, the are highly speculative.  In the main, it is not advisable to borrow money on this basis.  The government plan to review the retail mortgage market before 2012.  One of their proposals is to restrict borrowers from taking interest only mortgages which has recently led to lending institutions imposing restictions on these types of mortgage, particularly when the mortgage is a high loan to value.

Interest only mortgages were originally designed to be linked with an investment policy.

• Interest only mortgages are ideally suited to those who do not intend to keep the mortgage long term or have other means to repay the loan.

• Interest only mortgages are cheaper than repayment style loans but you do not have any means to repay the loan.

• Why not consider a part and part loan.

• Consider converting your mortgage to a repayment type loan at a future date.

• Consider a flexible mortgage that allows you to make periodic overpayments and 'offset' capital balances against the mortgage debt.

• Don't be tempted to take an interest only mortgage just because it is cheaper. Consider the long term effects.

• If you have to take an interest only loan, review it on a regular basis. Make sure you make arrangements to put a repayment vehicle in place as soon as you are able. 

Feel free to call us if you would like to discuss your options.

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