Mortgage is a security that the lender makes to the borrower. One of the popular forms of mortgages is called interest only mortgages. It requires you to craft a monthly payment to mortgage lender to pay off the interest on the amount borrowed. Further a separate long term strategy should be committed in interest only mortgage and can comprise of an investment plan, inheritance or settling the property in the future. 

In case of investment plan mortgage can be paid off in one of three forms; an ISA (Individual savings plan), a pension or an endowment. Such investment should not be provided by the mortgage lender.

Interest only mortgage can also converted in to a repayment mortgage in the future and becoming increasingly popular among first time buyers who get it hard at first to afford the mortgage costs. Mortgage lenders in this manner are very keen to facilitate you with interest only mortgage as specifically design product. Beware! Making your interest only mortgage into repayment form in future can cost you nominal charges from lender.

Advantages:
  • If your set limit of investment growth exceeds then you may able to pay off all of your mortgage before due time
  • You can use tax free investment plan.
Disadvantages:
  • If your investment doesn’t excel as per you expectations, chances are you may unable to pay off your mortgage.
  • Debt will remain same throughout the mortgage period.
  • Penalties will impose on some form of investment if you stop paying premiums.

Posted by Unknown Monday, December 7, 2009

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