Interest Only Mortgages for Harrow Home Buyers
Interest Only Mortgage is a very good, but a tricky product. For people who want to remain in a house for a long time and the house value appreciates over time, this product is good for them. However, this product could be misleading since you pay a very small amount for the first 1, 2, 3 or up to 10 years!
Interest only mortgage is available in two varieties. The variable rate and the fixed rate varieties. However, variable rate varieties are the most common in the market. When compared to the traditional types which require principal and interest repayment, Interest only mortgage is cheaper to pay for what the borrower is required to pay monthly is only the interest.
You should be prepared to repay a higher amount spread over a long period. For instance, if you have taken the interest only mortgage package to repay in 3 years, you will be paying the interest in 3 years. After which you will start repaying the principal with the adjusted interest. When computed over time, you will have paid much more compared to the traditional mortgage but at a slower rate.
The interest only mortgages normally allow for repayment of interest to offset the interest amount during the first few years of the mortgage. This is risky for lenders and that is why this plan has higher interest. If the asset is unlikely to depreciate, it is a very good way to buy.
If the housing market drops, interest only mortgages can turn ugly and very bad financially. This forces the borrowers to repay an amount that is higher compared to the actual value of the house. Therefore, refinancing the asset into a fixed rate mortgage is almost impossible.
It is vital to have in mind the nature of Interest only mortgages. A lot of caution should be taken when dealing with Interest Only mortgages. Although it gives you the fastest means to acquire your first time house, misusing this lending product could lead you to financial problems.
In conclusion, with the right financial management over time, an Interest only mortgage has the potential to save you a lot of money. It gives you the flexibility to acquire an asset and repay the loan at an affordable flexible rate. Using this type of mortgage plan, you can easily manage both your loan and your assets. Before you settle for an Interest Only Mortgage, it is very important to consider the relationship between the interest to be paid, the base interest and the overall payment so as to make right decisions. However, this plan is generally good for people who want to get their first house, but having low incomes currently but are committed to a good budget control.
For more information it is a good idea to talk to a Harrow mortgage broker about Interest only mortgages. You can get more details here.