What is an Interest Only Mortgage?
An Interest Only Mortgage is one where the repayments are made up entirely of the interest on the loan. When the mortgage term is complete, the capital originally borrowed is still outstanding. To cover the balance, borrowers are advised to make regular contributions into an investment policy alongside their mortgage repayments. This can be arranged by the mortgage provider, most commonly in the form of an endowment mortgage, an ISA mortgage or a pension mortgage. With this type of mortgage, the mortgage lender is advancing you money and asking you to do no more than pay the interest each month.
In other words you are merely servicing the debt, and the amount outstanding on your mortgage will remain constant. An interest only mortgage can be an excellent choice for some borrowers, who have a valid use for a lower initial required payment. The actual capital which is freed up to pay for your property can be invested into a long term investment fund, which, if invested carefully, ought to help pay off both your mortgage earlier than expected, and may even be used to cover the cost of your interest only mortgage payments. With interest only mortgages, most borrowers take out some kind of savings plan to ensure that at some time in the future they will have enough money to pay off their mortgage and have the satisfaction of knowing that the bricks and mortar belong to them. With an interest only mortgage, a borrower will invariably take out an endowment policy, a pension, or an ISA.
In addition, it is always good practice to arrange adequate life cover to ensure that should the mortgage payer die the loan will be repaid in full. With a repayment mortgage, you make monthly payments on the borrowed capital as well as the interest. With interest-only, however, your payments are made up of the interest alone, and you do not repay any of the capital until the mortgage term is complete. Because you are only paying back the interest on the loan, you will pay less each month than you would with a repayment mortgage. If you do choose an interest only mortgage, you need to make sure that you know from the outset how you intend eventually to pay off your mortgage loan.
Each month you will repay interest on the amount borrowed, but at the end of your term you need to be able to pay off the remaining capital. This may be achieved by taking out an Endowment, Pension or ISA, which should provide you with the amount you need at the end of your mortgage term. You must be aware that the value of investments plans can go down as well as up and are not guaranteed upon maturity. This makes an interest-only mortgage a more risky option than a repayment mortgage. Your home may be repossessed if you do not keep up repayments on your mortgage.
You may freely reprint this article provided the author's biography remains intact:.
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.Mortgage Expert Edward Irion Explains How To Save Up To 1/3 On Your Mortgage and Pay It Off In 2/3 the Normal Time
Most homeowners with a mortgage can save 10's of thousands of dollars and eliminate up to 10 years of mortgage payments, while reducing their effective interest rate by 2% or more,states Edward Irion, Pres. of Equity Solutions, a mortgage consulting company.Equity Solutions specializes in the Preferred Bi-Weekly Mortgage Plan which was developed as an adjunct to any mortgage in the USA and Canada.Homeowners DO NOT need to pay for costly
refinancing and are not subject to any credit checks and monthly mortgage payments do not go up.This is accopmlished by the Preferred Bi-Weekly Mortgage Plan, which splits your monthly mortgage payment into payments every two weeks, creating an extra payment each year which is used to pay down the principal.Also offered is a free yearly audit of your account. Mr. Irion says that 45% of Adjustable Rate Mortgages have been overcharged by $1500 or more. This service can cost $350 or more yearly if performed by an accountant.Another service offered...
Mortgage > Mortgage Expert Edward Irion Explains How To Save Up To 1/3 On Your Mortgage and Pay It Off In 2/3 the Normal Time
Why You Should Use a Mortgage Calculator to Understand the Mortgage Amortization Process
Mortgage amortization is often a mystery to the consumer. After all, they oftentimes watch as loan officers whip out their calculators and spill out complicated numbers in record time.But most consumers, unless they work in an industry related to the home buying and mortgage lending process, do not understand how loans are amortized. That's okay?as a consumer it's really not necessary for you to fully understand the amortization process and how your monthly mortgage payments are determined.However, it is important, if you are seeking a home mortgage loan or if you already hold one, to have a general understanding of mortgage amortization and how to figure monthly payments. In short, by having a general comprehension of mortgage amortization, you will be a more informed mortgage consumer.What Does It Do? When a mortgage loan is amortized, the amortization schedule is what will calculate the amount of your monthly mortgage payment. A normal, or standard, mortgage amortization will allow...
Why You Should Use a Mortgage Calculator to Understand the Mortgage Amortization Process
Mortgage > Why You Should Use a Mortgage Calculator to Understand the Mortgage Amortization Process
Mortgage Expert Edward Irion Explains How To Save Up To 1/3 On Your Mortgage and Pay It Off In 2/3 the Normal Time
Most homeowners with a mortgage can save 10's of thousands of dollars and eliminate up to 10 years of mortgage payments, while reducing their effective interest rate by 2% or more,states Edward Irion, Pres. of Equity Solutions, a mortgage consulting company.Equity Solutions specializes in the Preferred Bi-Weekly Mortgage Plan which was developed as an adjunct to any mortgage in the USA and Canada.Homeowners DO NOT need to pay for costly
refinancing and are not subject to any credit checks and monthly mortgage payments do not go up.This is accopmlished by the Preferred Bi-Weekly Mortgage Plan, which splits your monthly mortgage payment into payments every two weeks, creating an extra payment each year which is used to pay down the principal.Also offered is a free yearly audit of your account. Mr. Irion says that 45% of Adjustable Rate Mortgages have been overcharged by $1500 or more. This service can cost $350 or more yearly if performed by an accountant.Another service offered...
Mortgage > Mortgage Expert Edward Irion Explains How To Save Up To 1/3 On Your Mortgage and Pay It Off In 2/3 the Normal Time
21st Century Mortgage Bankers Expands to Cater to California
21st Century Mortgage Bankers, Inc. opened its first California branch office November 15, 2004. The Westmont, IL-based Mortgage Banker tapped industry veteran Mark Luzi as its new Senior Vice-President of Western Operations and opened its Poway, CA doors with 8 Mortgage Bankers."Entering the active California market is our first step into the Western U.S. region," says Mr. Luzi.
"We expect to aggressively open new mortgage banking offices throughout all of California and into Arizona and Nevada." Mr. Luzi most recently served as a Division Sales Manager with Accredited Home Lenders, a publicly traded Mortgage Banking company with a $976 million market capitalization.About 21st Century Mortgage Bankers21st Century Mortgage Bankers is a premier Mortgage Banker in the Chicago region and also serves Wisconsin, Minnesota, Iowa, Colorado and California.
With local underwriting and processing, 21st Century Mortgage Bankers provides a superior combination of mortgage product,...
Mortgage > 21st Century Mortgage Bankers Expands to Cater to California
Mortgage Information - Refinancing? Second Mortgage? Home Equity Loan? Understand The Basics
A mortgage is usually the biggest purchase that an individual makes, and because of that, many people tend to get nervous during the process. But wouldn't it make things easier if you felt that you had a "handle" on the process?or at least the terminology? After all, in order to get the best deal on your mortgage loan, you will need to understand certain things such as points, interest rates and closing costs. If you feel like you could stand to brush up on your mortgage loan terminology, why not read the following common terms and their definitions?PointsA point is amount that a borrower will pay in order to reduce the interest rate on their mortgage. One point is generally equal to 1% of the loan amount. For example, if you were taking out a 100,000 mortgage, and wanted lower interest rates, you might have to pay anywhere from 1-3 points (or $1,000-3,000 dollars) to get that rate.
It's important to note that some lenders will advertise very low interest rates, and only when...
Mortgage Information - Refinancing? Second Mortgage? Home Equity Loan? Understand The Basics
Mortgage > Mortgage Information - Refinancing? Second Mortgage? Home Equity Loan? Understand The Basics