Mortgage and Refinancing Information Channel:
We would like to thank the local libraries, schools, and universities for recommending students to visit us when doing research on any of our information topics.
What is an Interest Only Mortgage?
An Interest Only Mortgage is one where the repayments are made up entirely of the interest on the loan. When the mortgage term is complete, the capital originally borrowed is still outstanding.
To cover the balance, borrowers are advised to make regular contributions into an investment policy alongside their mortgage repayments. This can be arranged by the mortgage provider, most commonly in the form of an endowment mortgage, an ISA mortgage or a pension mortgage.
With this type of mortgage, the mortgage lender is advancing you money and asking you to do no more than pay the interest each month. In other words you are merely servicing the debt, and the amount outstanding on your mortgage will remain constant.
An interest only mortgage can be an excellent choice for some borrowers, who have a valid use for a lower initial required payment. The actual capital which is freed up to pay for your property can be invested into a long term investment fund, which, if invested carefully, ought to help pay off both your mortgage earlier than expected, and may even be used to cover the cost of your interest only mortgage payments.
With interest only mortgages, most borrowers take out some kind of savings plan to ensure that at some time in the future they will have enough money to pay off their mortgage and have the satisfaction of knowing that the bricks and mortar belong to them.
With an interest only mortgage, a borrower will invariably take out an endowment policy, a pension, or an ISA. In addition, it is always good practice to arrange adequate life cover to ensure that should the mortgage payer die the loan will be repaid in full.
With a repayment mortgage, you make monthly payments on the borrowed capital as well as the interest. With interest-only, however, your payments are made up of the interest alone, and you do not repay any of the capital until the mortgage term is complete. Because you are only paying back the interest on the loan, you will pay less each month than you would with a repayment mortgage.
If you do choose an interest only mortgage, you need to make sure that you know from the outset how you intend eventually to pay off your mortgage loan.
Each month you will repay interest on the amount borrowed, but at the end of your term you need to be able to pay off the remaining capital. This may be achieved by taking out an Endowment, Pension or ISA, which should provide you with the amount you need at the end of your mortgage term.
You must be aware that the value of investments plans can go down as well as up and are not guaranteed upon maturity. This makes an interest-only mortgage a more risky option than a repayment mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may freely reprint this article provided the author's biography remains intact:
About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.
MORE RESOURCES updated Sat. March / 06 / 2021
Today’s mortgage refinance rates mixed — one key rate drops while another rises | March 2, 2021 - Fox Business
Today’s mortgage refinance rates mixed — one key rate drops while another rises | March 2, 2021 Fox Business
Can refinancing a mortgage hurt my credit score? Fox Business
Today's mortgage refinance rates see little change as market holds steady | February 25, 2021 - Fox Business
Today's mortgage refinance rates see little change as market holds steady | February 25, 2021 Fox Business
Best cash-out refinance lenders in 2021 Bankrate.com
3 signs you should refinance your mortgage right now Fox Business
Mortgage Recast: How to Reamortize and Save Money Credible News
Today's mortgage and refinance rates: February 14, 2021 | Rates down Business Insider
Refinance Loans Propel Yet Another Increase In Home Mortgage Lending Activity During Fourth Quarter Of 2020 - PRNewswire
Refinance Loans Propel Yet Another Increase In Home Mortgage Lending Activity During Fourth Quarter Of 2020 PRNewswire
What Is a Mortgage and How Does It Work? | Mortgage 101 The Mortgage Reports
What Are The Benefits Of Cash-Out Refinancing? Is It Worth It? The Mortgage Reports
Can Closing Costs Change On The Closing Disclosure? The Mortgage Reports
Can You Use A 203K Rehab Loan For An Investment Property? The Mortgage Reports
Top 5 mortgage refinance questions answered Fox Business
How to decide if you should refinance your mortgage Fox Business
Pros and cons of a cash-out mortgage refinance Fox Business
How to refinance your mortgage Fox Business
4 ways to maximize your mortgage refinance savings Fox Business
Mortgage refinance: Everything you need to know Fox Business
How do I get the most out of my mortgage refinance? Fox Business
Who's exempt from the new mortgage refinance fee? Fox Business
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now - Fox Business
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now Fox Business
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 - Forbes
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 Forbes
Mortgage refinance applications soar despite a new fee that increases the cost - Pittsburgh Post-Gazette
Mortgage refinance applications soar despite a new fee that increases the cost Pittsburgh Post-Gazette
What are the hidden costs of refinancing a mortgage? Fox Business
4 ways to get lower mortgage refinance rates Fox Business
The best mortgage refinance lenders of March 2021 Business Insider
Despite low mortgage interest rates, homeowners should research the caveats before reﬁnancing - Seattle Times
Despite low mortgage interest rates, homeowners should research the caveats before reﬁnancing Seattle Times
A record 19.4 million homeowners can now save big on a mortgage refinance, as rates hit another new low - CNBC
A record 19.4 million homeowners can now save big on a mortgage refinance, as rates hit another new low CNBC
5 reasons to refinance your mortgage right now HousingWire
Complete Checklist of Mortgage Refinancing Requirements Credible News
10 things to know before refinancing your mortgage Fox Business
Refinancing your mortgage? Don’t make this mistake Fox Business
3 Mortgage Refinance Strategies to Consider in 2021 The Motley Fool
How a mortgage refinance affects your net worth Fox Business
10 tips for getting the best mortgage refinance rate, from checking your credit report to choosing the right lender - Business Insider
10 tips for getting the best mortgage refinance rate, from checking your credit report to choosing the right lender Business Insider
Today’s mortgage refinance rates climb upward — though one key rate holds steady | October 23, 2020 - Fox Business
Today’s mortgage refinance rates climb upward — though one key rate holds steady | October 23, 2020 Fox Business
Jumbo Mortgage Refinance Rates for March 2021 NextAdvisor
How to refinance your mortgage without closing costs Fox Business