What is an Interest Only Mortgage?

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Interest-only mortgage is the kind of loan where the scheduled payments are for the interest only and the loan sum, which is usually paid after the borrower has paid the interest. The option for paying interest only lasts for a certain period, usually with a range of 5 to 10 years. However, borrowers can have an option of paying more than the interest. With this kind of payment, the borrower is expected to return the actual amount borrowed minus the interest that was already paid back to the lender.

Who can benefit from interest-only mortgage?

These types of Lehtbridge Mortgages are suitable for those with fluctuating incomes and those who can benefit from the flexibility of interest-only mortgage payments. Examples are those who frequently get their incomes from commissions and bonuses. This type of mortgage payment is also good for those who are planning to buy a second house. The process of trading up to a more expensive house may require more expensive fees, which can be made more manageable when they start with interest-only payments.

Disadvantages of paying interest-only mortgage

This is not the best option for those who want to pay off their debts at the shortest time possible. If the borrower pays interest only mortgage for a certain period of time, this will not result in any deduction in the principal amount. In short, the loan balance stays the same. With this kind of mortgage, there is always the risk that at the end of the agreed term, the borrower has not accumulated the sufficient amount to pay the lender the original amount through the bank.