An interest-only mortgage is a mortgage type whereby only interest payments are made each month, unlike the interest and capital payments you would make payments on the capital of the mortgage.Making interest payments monthly stop’s the mortgage capital balance from increasing however this does not go towards paying it off. You will pay the full (capital) mortgage balance either at the end of the mortgage term or when you sell the property.
You could find an interest-only residential mortgages is useful for your needs if You have another kind of repayment strategy for example you have equities in other properties that you would sell or other investments types.
NEED A REPAYMENT VEHICLE?
We will discuss with you the types of repayment vehicle that could help you to pay off te mortgage.
You’re thinking of downsizing at the end of the mortgage term when the time has come to repay the mortgage you want to move after your children have left home as you don’t want to keep a big house
You may just simply want to remortgage to an interest-only product because you want to your monthly payments reduced and you have a suitable repayment vehicle in place
The alternative is for you to have a repayment mortgage. Though the monthly payments are significantly higher if all monthly payments are made the mortgage is guaranteed to be fully paid at the end of the term.
These mortgages do carry a risk that if you could possibly not make enough to cover the overall payment at the end of the mortgage term.