If you are out there wondering which mortgage deal to pick, then the best in the market these days is the interest only mortgage deal. With this deal, you only have to pay the interest on the capital each month rather than the capital itself. However, no deal is perfect for all individuals, thus interest-only mortgages can benefit a certain group of people in specific circumstances yet also comes with some cons. Given below are some of its merits and demerits.
The biggest positive aspect of this deal is that the monthly repayments will be less than that in the repayment mortgage. Now, each month your mortgage payment won’t be a burden for you. Secondly, along with interest-only mortgage deals, you can choose a savings account that becomes your repayment vehicle. That account is tax-efficient and can gain the best interest rates for you. It can also make you capable of doing repayments by the end of the term.
As for the disadvantages, interest-only mortgages are considered quite risky mainly because they lack the complete outline about the repayment of the loan from the borrower. There could be serious problems when the term of the mortgage deal ends, and you have no other means for the repayment of the outstanding balance on the loan. Furthermore, the interest paid in this deal is more than the one paid in the repayment mortgage. Another feature that can be counted as a disadvantage is the lengthy 25 year mortgage term.
Irrespective of those pros and cons, the main reason why 40% of borrowers prefer this mortgage deal is that it provides a repayment vehicle. It’s the savings from this vehicle that can make the task of repayments easier for you. Yet, if you wish to go for this deal, you’d better do some research beforehand.
