UK Interest Only Mortgage
This is an arrangement where you're only paying off the interest on the loan. Unlike a standard mortgage you are not paying off the capital debt part of the mortgage. so if you were to borrow £80,000, at the end of the mortgage term you would still owe £80,000 as you have only been paying back the interest on that £80,000.
An Interest Only Mortgage is very often used by people who buy to let. With an interest only mortgage your monthly payments are usually quite low. People assume that becuse these type of mortgages cost you less they could therefore borrow more, but the idea that you can pay less is only a short term solution, because you are then expected to set up an investment fund in order to pay off the capital. In order to do this your mortgage salesperson may offer you an investment "side" or "by product" when you take out an interest only mortgage.
The capital debt is supposed to have been repaid by the end of the mortgage term.
The idea of the investment side of the mortgage is that this fund would hopefully have grown enough to pay off the capital and leave you with a surplus.
Interest only mortgages can be used by new property buyers to keep monthly
payments low for a short term whilst they concentrate on other things. They
can then revert to a mortgage where they pay both capital and part interest.
Interest Only Mortgages can also be useful to the property renovation and buy to let market as they
pay off the interest only whilst they renovate a property and then they sell
the property or let it, hopefully quickly never having to pay back any capital.
You should still remember failure to pay monthly repayments could
result in your lender repossessing your property and reselling it to recoup the
debt you owe.
Full range of UK Mortgages:
100% | Buy to Let | Capped Rate | Discounted Rate | Endowment | First Time Buyer | Fixed Rate | Flexible | Interest Only | ISA | Non Status | Self Build | Self Certification | Self Employed | Tracker | Variable Rate
