Interest only means your monthly mortgage payments will only cover the interest you owe on the loan and you pay nothing towards repaying the capital. Sometimes you will need to make arrangements to repay the capital from your other resources or set up a savings plan to cover the repayment in the future.
This type of mortgage has gained in popularity mainly due to soaring house prices and keeps your monthly payments low and gives you the flexibility to invest in a range of savings plans, some of which can have tax advantages e.g Individual Savings Accounts (ISA’s) or pensions however no repayment of capital is included in the monthly mortgage payments. There is no guarantee that your investment or savings plan will cover the mortgage repayment when it becomes due.
You will need to monitor this carefully and increase your savings early if required. If you require any more advice please do not hesitate to contact our helpful Leicester mortgage brokers for impartial advice.
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