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What is an interest only mortgage?
An interest only mortgage allows you to pay just the interest charged each month for the term of the loan. You don’t have to repay the amount you’ve borrowed until the end of the term.
With an interest only mortgage, your monthly payment pays only the interest charges on your loan, not any of the original capital borrowed. This means your payments will be less than on a repayment mortgage, but at the end of the term you’ll still owe the original amount you borrowed from the lender.
The difference between interest only and repayment mortgage.
With a repayment mortgage, you pay back a small part of the loan and the interest each month. Assuming you make all your payments, you’re guaranteed to pay off the whole loan at the end of the term.
With an interest-only mortgage, you only pay the interest on the loan. At the end of the term you’ll still owe the original amount you borrowed.
The main advantage of paying a mortgage on an interest-only basis is that your monthly payments will be much cheaper.
All lenders will require you meet certain lending criteria and conditions before appling for an interest-only mortgage.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Securing short term debts against your home could increase the term over which they are paid and therefore increase the overall amount payable
You may have to pay an early repayment charge to your existing lender if you re-mortgage.
Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.
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