There are very few people who do not take out at least one loan within their lifetime. There are many people who are financially well-off and do not find the need to go for a loan, but it is not always easy to manage money.
The management of finances is an art which most people do not possess instinctively. Thus there are banks and other financial institutions that offer mortgage loans to people.
An interest-only mortgage loan has its own set of advantages and disadvantages. Let us now have a look at the advantages of opting for an interest only lifetime mortgage.
The main benefit of this type of agreement is that the payments you make are lower compared to usual loans & protects your inheritance unlike equity release schemes.
An interest-only mortgage is an effective way of trying to reduce the mortgage cost. The reason behind this is that with an interest-only mortgage, the initial payments do not go towards covering the principal amount.
The interest calculated for the term of the loan is first recovered in a series of fixed instalments, after which the payments made proceed towards covering the principal amount.
Once the interest is covered, the amount of the fixed instalments is increased and it is then used to cover the principal amount. This kind of arrangement works well for the people who can be sure of the fact that their income will increase in the future through promotions or any type of inheritance.
It is however essential that one reads the terms and conditions of the lifetime mortgage including the fine print very carefully before signing it and making a commitment.Back