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INTEREST ONLY MORTGAGE
A mortgage where normally none of the capital is paid off until the end of the mortgage term. This means that you simply pay the interest due on your account on a monthly basis. For Example you borrow £50,000 over a 25 year mortgage term on an interest only basis. At the end of the 25 year term the balance outstanding will be £50,000.
If you have an interest only mortgage you need to make provisions to ensure that at the end of your mortgage term you have an amount available to repay the balance. This is usually through the use of savings e.g. pension, insurance policies e.g. endowment, investments e.g. ISA, an inheritance or even by selling the property.
Typical mortgage terms are usually 5 years, 10 years, 15 years, 20 years, 25 years & 30 years
TYPES OF INTEREST RATE PRODUCTS
VARIABLE RATE - On a variable rate mortgage the interest rate will vary from time to time. This is usually as a result of changes in the cost to our lenders of borrowing the money that they lend. In the event of an interest rate change, your mortgage provider will notify you in writing of the exact interest rate change and how it will affect your monthly payments, before any increase or decrease in the rate of interest occurs. This type of variability is generally linked to the Bank of England Rates.
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