Compare interest-only mortgages for investors and homebuyers and read more about how these mortgages work.
Interest-only mortgages differ from standard mortgages in the way they are repaid. Traditional repayment mortgages have repayments that include both the interest and a small proportion of the principal. Interest-only mortgages, on the other hand, repay only the interest on the loan for the term. While you make interest-only repayments you won’t be reducing your debt, and need to have another way of repaying what you borrowed.
What are the pros and cons of interest-only loans?
- Lower repayments. With an interest-only mortgage, you’ll have lower repayments compared to a comparable principal and interest loan.
- Market risk. There is higher risk than you have with repayment deals because you need to find a way of repaying your loan at the end of the term, which is usually an investment. Even if you plan to sell the property to repay the loan, the property’s value may have fallen, leaving you with not enough to cover the debt.
I have a few more questions about interest-only mortgages
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