An interest only mortgage allows the owner of the property to make monthly payments only on the interest of the mortgage. This is usually only on a fixed term of between 5 to 7 years, when it is possible to pay a lump sum, to refinance, or begin to pay the principal of the mortgage.
There are a few reasons why an interest only mortgage is an attractive proposition. Firstly it is a great way to be able to afford to own a home right now, rather than having to wait for, possibly, years until you have saved up the money to be able to afford it. Another reason an interest only mortgage is desirable is if you know that you plan to sell the property in a relatively short space of time, or that you know that in the future youbll be able to cope financially with a payment increase once the interest only period is over.
The advantages of an interest only loan are easy to follow. If you are sure that in the future youbll be able to make larger payments, this initial period offers you monthly payments that are relatively low. This approach allows you to invest money in other areas that might be more profitable for you in the long run, as well as giving you the chance to purchase a larger home in future when you can qualify for a larger mortgage than the current property allows.
To find out more about our range of mortgages, call Central Mortgages to speak to one of our advisors.
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