All about Interest Only Mortgages November 26, 2007

Interest Only Mortgages: Deal or Not?

 Are you ready to purchase the house of you dreams? Step up now as you can do that through interest only mortgages: low monthly payments, tax deductions, all on your current income? This sounds pretty good, I’ sure, but there is more to find out about the interest only mortgages… Interest only mortgages are becoming more popular nowadays, and many home buyers choose it for its interesting features.  One of the best advantages for choosing an interest only mortgage is that the monthly payments are low and you don’t have to pay off your debt until the close of the mortgage contract arrives. 

•  It’s great for the first time buyers as well, because this might be the only way they can purchase a house.
•  This can be a great choice for people who work in industries where big bonuses are paid once year. They can pay a low amount of cash monthly and pay off a lump sum when their annual bonus is paid.

There are also disadvantages, such as the fact that at the end of the 25 or 30 years of contract, you still have a lot of debt to repay, as the interest only mortgages don’t include a method of repaying your debt. Therefore, before opting for an interest only mortgage, think about it on a long term; the interest only mortgages on a property can be pretty expensive.

•  The interest only mortgages are actually investment based, as you only pay off the interest on the capital amount of money you have borrowed during the term of the loan.
•  In case this doesn’t happen, the borrowers will have to cover all additional sums at the end of the term and pay off the capital sum.

Our advice is to think carefully when it comes to opting for the best interest only mortgages.  The whole mechanism of interest only mortgages is based on the principle that the investment will achieve its projected growth until the end of the mortgages term in order to cover the high balance that needs to be paid off at that time. 

Nevertheless, interest only mortgages are a flexible option, as this type of mortgage suits people that are due to come into money in the future and who want to keep low payments in the mean time.