Interest only MortgageMortgage only interest
That means that at the end of the mortgage period you still have exactly the same amount owed to the creditor that you lent in the first place - the credit capital - which you then have to disburse in full. If you have a regular mortgage, every month you repay the interest and part of the capital - i.e. at the end of the mortgage period you have disbursed everything.
So for example, if you take out an interest only £200,000 mortgage over 25 years at an interest of 2.5%, your month rates would be just £417. An ordinary repay mortgage, over the same 25 years and 2.5% interest rates, would have £897 per month pay back. If you want a pure interest mortgage, you must have another way to pay the capital - and the savings and loan association will want to know your payment methods before they offer you a pure interest mortgage.
At the end of the lease period, the easiest way is to resell the real estate and repay the creditor. A lot of buy-to-let mortgage transactions, where you buy a specific piece of real estate in order to let it rather than move into it, are handled in this way. Others are a redemption formula - a saving scheme, a retirement scheme or another mutual funds - or a kind of fixed amount, usually through bequest.
What mortgage method is cheapest? A pure interest mortgage is usually less costly in the shorter run because it has lower interest rates, but more costly in the long run because you do not reduce the capital. If, for example, you are using the current pure mortgage of £200,000 mortgage rate scenarios, the overall repayment would be £325,000.
Redemption mortgages are usually more costly in the shorter run because you have bigger redemption payments every month, however, you are paying the creditor less overall because you reduce the capital every single months - and thus every single months you are paying less and less interest. Under the £200,000 mortgage precedent scenarios, the overall amount of redemption would be £269,000.
Is it possible to obtain a partial or partial mortgage? Yes, you can get a mortgage that is a partial payback and a partial interest rate. They will disburse a portion of the mortgage each and every months, but there will still be an amount to be paid at the end of the mortgage. May I remagrate to a pure interest mortgage?
Is it possible to change between redemption and interest rate mortgage? Talk to your mortgage provider to find out more.