Opting for the interest only mortgages has its own benefits. When the rising mortgage loans prevent you from a new home you can head on to the interest only mortgage rates loan programs. Most of the home buyers are not well aware of this interest only mortgages option. However these types of loans had received their popularity in the past few years. But hang on. Before considering this option you should be aware with the following factors.
How do the interest only mortgage loans work?
Generally when you apply for a mortgage loan, your monthly payments will be composed of both interest & remaining balance of principal. But when you choose the interest only mortgages you will be required to pay only the interest rates. This is how you need to pay only the minimum monthly payment. One main thing you need to consider here is this interest only mortgage rates are only temporary. If you want to avoid the future shocks on interest rates you should make some occasional payments towards the principle amount.
Try to limit the period of interest only mortgages to the maximum of 2 to 3 years so that you can reduce financial burden of paying high mortgage payments in the upcoming years.
Interest Only Mortgage Terms
There are several different kinds of interest only mortgage loans to choose between. Most of the times, it is suggestible to choose only 2 or 3 year terms. But according to your financial situation you can enroll yourself in some longer interest only mortgage rate programs. An average interest only mortgage program includes a 5 year interest only mortgage option followed by 30 year fixed rate mortgages.
4/10 UK households are getting mortgages with the interest only mortgage option. Reason is instead of waiting for the better financial situation to get a standard mortgage, people can get a mortgage now and can pay only the interest rates each month for some 2 or 5 years, in between or after that they can pay toward the capital and repay the loan. By doing so, home buyers can save considerable amount from their salary.
Following are some top 4 key considerations that help the people to decide on whether or not they can opt for the interest only mortgage loan programs.
Advantages of interest only mortgages
When you sign up for this mortgage loan program people can save more money every month that can be used for the spending or saving every month. Reason you will be paying only the interest rate occurred on your principal amount. Interest rate you need to pay will vary based on the fixed rate or variable rate mortgage option you have chosen along with this scheme.
Potential drawbacks of the interest only mortgages
When you choose the interest only mortgages your capital amount on the mortgage will remain the same unless you are making some occasional payments until the end of the interest only mortgage term. On other hand people who have signed up with the repayment standard mortgages pay off the principal amount ever month so they pay off the entire principal amount at the end of the term.
How Are You Going To Pay off the capital amount?
Since you are in the interest only mortgages scheme it is enough to pay the mortgage interest rates today. So you can save considerable amount every month. Put this amount in some saving schemes. It is good to save your money in the high interest yielding accounts. So that you can use this amount to the repay the capital amount at the end of term without any trouble.
Will your income increase in future?
When the financial situation is not very good but it will increase in the near future then you can consider the interest only mortgages scheme. It is good to check the mortgage interest rates today to ensure whether you owe a best deal in this scheme.