Interest only mortgages
If you wish to pay only the interest on the loan to your mortgage provider and not try to reduce the capital you owe then an Interest only mortgage is a good option. The main point to understand about paying your mortgage in this way is that none of the original loan will be repaid so once the term of the mortgage is concluded you will either need to sell your house to fund the capital repayment or find some other source of lump sum money to cover the amount.
It is the case with an Interest only mortgage that, often, your lender will allow you to repay lump sums during the term of the loan. The size of the lump sum most likely will be dictated by a percentage annual repayment amount set by your lender. If you pay off more than that percentage you may incur financial penalties. So your mortgage may allow you to pay off 10% of its outstanding value each year.
Obviously making the final payment is all important so you may choose to invest funds in investments that should grow and generate money that will cover the capital cost of the loan.
When choosing from a variety of investment options you may wish to consider those that offer you tax advantages. One of the beauties of an investment vehicle is that should you move or re-mortgage, your investment can normally be taken to cover the new loan.
So then, the bottom line with an Interest only mortgage is that unlike repayment mortgages, the initial cost of your property that required a mortgage does not reduce over time. If you borrowed £100,000 at the start and made no capital repayments then you will still owe £100,000 at the end of the term of your mortgage.
Interest only mortgage. There is never any guarantee that the investment you choose will perform sufficiently to cover your loan by the end of the term.
Interest only mortgages don't change much but it is a good idea to get in touch with us so we can keep you up to date with all the elements of an Interest only mortgage. For advice on investments we act as introducers.
Please Note: You need to ensure they can afford the mortgage payments if there is no tenant in the property.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBTS SECURED ON IT.
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