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What is an Interest Only Mortgage?
Put simply, the amount you pay to your mortgage lender every month is made up of ONLY the interest that is owed against the mortgage loan for that month. This means no capital is being paid off and at the end of the term you will still owe the capital initially borrowed.
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This is ideal for buy-to-let owners who wish to rent out a property then sell it for a profit at the end of the mortgage term. This way the owner makes monthly profit from the tenants rent and may get a healthy lump sum at the end of the term.
Upon completing an interest only mortgage agreement/contract, you're expected to make an additional monthly payment either to an Individual Savings Account, endowment or other types of investment. These extra payments are to be put toward paying off the capital in full at the end of the mortgage term. Over the past few years, many people have been caught out with their investments nowhere near reaching the amounts required to pay off the capital so they have been forced to remortgage
for the existing debt. As you can see, this type of mortgage carries a certain amount of risk
Over the last few years, first time buyers have been forced to take out interest only mortgages as they are far cheaper than the safer "repayment mortgage". With house prices so high, the rate of increase has slowed right down and these buyers could find themselves with a house at the end of the mortgage term which is worth less than the original purchase price.
Visit www.aph.org.uk and let us find you a cheap interest only mortgage deal. | 
