If you’re in the market for a mortgage, you may have heard about interest only mortgages. These types of mortgages allow you to pay only the interest on your loan for a set period of time, typically between five and ten years, before transitioning to full repayments.
While interest only mortgages can be an attractive option for some buyers, they’re not for everyone. In this post, we’ll explore the pros and cons of interest-only mortgages and help you determine whether they’re right for you.
What is an interest only mortgage?
An interest only mortgage is a type of mortgage where you pay only the interest on the loan for a set period of time, typically between five and ten years.
During this time, your monthly payments will be lower than if you were paying both the interest and principal. However, at the end of the interest-only period, you’ll be required to start paying both the interest and the principal, which could result in higher monthly payments.
Exploring interest only mortgage rates and deals
Interest only mortgage rates are typically lower than standard mortgage rates, which can be a major advantage for those looking to keep their monthly payments low. Additionally, interest only mortgages can be a good option for those with irregular income or who expect their income to increase in the near future.
However, it’s important to note that interest only mortgages often come with stricter lending criteria, and you may be required to have a larger deposit to secure the best interest only mortgage rates. Additionally, you’ll need to have a plan in place for paying off the principal at the end of the interest-only period.
What happens at the end of an interest only mortgage?
At the end of the interest-only period, you’ll be required to start paying both the interest and the principal, which can result in higher monthly payments. You’ll need to have a plan in place for paying off the principal, which could include selling the property, using savings, or refinancing the mortgage.
Is an interest only mortgage right for you?
Interest only mortgages can be a good option for those looking to keep their monthly payments low, but they’re not for everyone. If you’re considering an interest only mortgage, it’s important to understand the risks and have a plan in place for paying off the principal at the end of the interest-only period.
At Sett Mortgages, our team of experts can help you determine whether an interest only mortgage is right for you. With access to hundreds of lenders and mortgage products, we can help you find the best interest only mortgage deals and rates for your unique situation. Contact us today to learn more.
