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Part 2 - The pitfalls of interest only mortgages
Then during the late 90's when the shortcomings of endowment policies slowly became understood, repayment mortgages became the norm. Now with interest only mortgages, the pendulum is swinging again. It's as a result of high house prices and people straining to get onto and up, the housing ladder without being prepared to economise in other areas of their spending.
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- Sorting a mortgage out can be stressful, especially if you have a poor credit history. This article provides some useful advice
- Interest Only Home Loans
- An introduction to the workings of an interest only mortgage.
- Foreign Currency Mortgages. What are they and what are the risks?
- Foreign currency mortgages could save you a lot of money but the risks are high. This article explains.
- Mortgages. Big changes in the buying and selling of houses.
- In mid summer 2007 everyone who wants to sell a property will have to prepare a Home Information Packs before they put it on the market. This article explains what the Packs will have to include what they'll cost - and whether we expect them to work!
- Mortgages. Watch out for add-on charges.
- Mortgage lenders use headline interest rates to attract borrowers. But behind the scenes they're introducing a whole raft of add on charges. This article explains.
- House price rises – a cautionary tale
- The housing market seems to be buoyant with house sales exceeding expectations in some parts of the country. If mortgage rates start to rise, the market may see a correction. Take care not to take on too much debt.
We are sure that the economics of family finances will continue ( personal secured loans ) to fuel the current popularity of interest only mortgages. It will become the duty of the lenders and the mortgage brokers to point out to their clients the alternatives open to them.
In the past, the norm has always been to start the home ownership with a 25 year mortgage. But an alternative could be to stretch it out to 30 or even 35 years. Then at least repayments are being made and when family finances permit, borrowers can make optional lump sum repayments to reduce ( life assurance ) the repayment term. In any case people tend to move home every eight to ten years and at each move a new mortgage has to be arranged. Those occasions then represent an obvious opportunity to reassess long term family finances.
For example, the monthly repayments for a £120,000 repayment mortgage { life assurance } over 25 years at say, 4.9% would cost £702.42 per month but if the repayment period was stretched to 35 years, the monthly repayment drops down to £603.03.
But there are other solutions. You could arrange a mortgage where part of the loan is on an interest only basis and the balance is on a repayment basis. It's a sort of mid way option. At least these mortgages start the repayment process and later when you move or the family income builds, take the opportunity to reassess the type of mortgage you need.
Your home may be repossessed if you do not keep up your repayments on a mortgage or any debt secured on it. Security by way of a charge on your home may be required.