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| Home > Mortgages > Interest Only Mortgage |
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An interest only mortgage refers to a mortgage that is set up where the monthly payments of the mortgage are just paying the interest on the loan. The loan amount will not rise or fall. If a person started with a £200,000 interest only mortgage, then after every year, the amount of the loan will remain at £200,000. At the end of the term of the mortgage, the loan needs to be repaid, so it is common to also have a "repayment vehicle". Common examples include, endowments, pensions and ISAs. Some lenders will allow the sale of the property to be used as a "repayment vehicle".
With these type of mortgages there is the risk that there will not be sufficient money to repay the loan at the end the mortgage term. The majority of Buy to Let mortgages are set up on an interest only basis, as it is argued that it is more tax efficient. This has to be weighed against the desire to repay the loan with certainty. |
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| Your home may be repossessed if you do not keep up repayments on your mortgage. |
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