When you are having an idea of a new mortgage deal, there are a vast number of things to think about. An interest-only mortgage is a type of mortgage loan in which you're supposed to pay only interest on the total capital amount.
Pros of Interest-Only Mortgages:
According to the Financial Services Authority, four out of ten households have interest only mortgages. There are a number of advantages available on interest only mortgage deals; mainly monthly payments will be extremely lower than all the other type of mortgages. This signifies you can expend your income each month for yourself, or on household improvements.
An interest only mortgage is sometimes considered to be preferable in the eyes of investors. Because, they are able to claim back their tax amount on the mortgage interest. As well, with interest only mortgages, you may choose a savings account or the repayment vehicle which benefits the best interest rates. If you are having ability to handle this well along with the mortgage payments, this option will definitely assist you to save money in the long run.
An interest mortgage also allows you to make better use of the extra money. For example, you can invest this extra money into a high yield savings account, or another property or the stock market. This can offer you the additional monthly income, which you may reassign it to high interest rate savings account to compensate for your loan at the remainder of the mortgage term.
Cons of Interest-Only Mortgages:
These mortgages are considered as risky, as they do not provide borrowers with a complete outline for how they are supposed to pay the capital sum, and this may cause problems when the mortgage term ends with outstanding debt and with no alternative repayment options.
Also, the repayment mortgage will be more expensive in the short term. But, in long term process, you are supposed to reduce the paid interest on the total capital. With an interest only mortgage, the capital amount will be still payable, until the end of the mortgage term – often 25 years later.
The biggest drawback with these interest only mortgages is that the payments can increase considerably. Due to this reason, most of the people will refinance their way out of these mortgage loans. Although, it may seem like the pros overcoming the cons substantially, this mortgage is not a suitable option for everyone and it depends on your needs and capability to choose upon this interest rate mortgage.
Pros of Interest-Only Mortgages:
According to the Financial Services Authority, four out of ten households have interest only mortgages. There are a number of advantages available on interest only mortgage deals; mainly monthly payments will be extremely lower than all the other type of mortgages. This signifies you can expend your income each month for yourself, or on household improvements.
An interest only mortgage is sometimes considered to be preferable in the eyes of investors. Because, they are able to claim back their tax amount on the mortgage interest. As well, with interest only mortgages, you may choose a savings account or the repayment vehicle which benefits the best interest rates. If you are having ability to handle this well along with the mortgage payments, this option will definitely assist you to save money in the long run.
An interest mortgage also allows you to make better use of the extra money. For example, you can invest this extra money into a high yield savings account, or another property or the stock market. This can offer you the additional monthly income, which you may reassign it to high interest rate savings account to compensate for your loan at the remainder of the mortgage term.
Cons of Interest-Only Mortgages:
These mortgages are considered as risky, as they do not provide borrowers with a complete outline for how they are supposed to pay the capital sum, and this may cause problems when the mortgage term ends with outstanding debt and with no alternative repayment options.
Also, the repayment mortgage will be more expensive in the short term. But, in long term process, you are supposed to reduce the paid interest on the total capital. With an interest only mortgage, the capital amount will be still payable, until the end of the mortgage term – often 25 years later.
The biggest drawback with these interest only mortgages is that the payments can increase considerably. Due to this reason, most of the people will refinance their way out of these mortgage loans. Although, it may seem like the pros overcoming the cons substantially, this mortgage is not a suitable option for everyone and it depends on your needs and capability to choose upon this interest rate mortgage.