Have you been enticed by an interest-only loan or mortgage?
An interest-only mortgage may initially seem like a brilliant prospect when you decide to buy a house; an interest-only period where you only pay back the interest of your loan rather than what you’ve actually borrowed is an attractive option for many.
Lower monthly repayments mean you’ll free up more cash, and you’ll have a long time before you have to actually start paying back what you owe (the interest period on interest-only home loans is usually five or ten years). An interest-only loan might simply be the only option you can afford at the minute. However, there are dangers to consider when going in for an interest-only loan that you should be aware of before signing up to one.
When you sign up for an interest-only mortgage you’re essentially signing up to be giving away your own cash for a number of years without even putting a dent into the actual amount you’ve borrowed. Consider how much your total payments for the interest period will be once it’s over, and then add that to the amount you’ve borrowed. The final sum may not be as an attractive an option as you first thought. You could possibly be signing up for a loan which is going to charge you a huge surplus on what you need to borrow, and it may be worth simply waiting a year or two and going for a traditional loan that could be much cheaper in the long run.
Putting off the inevitable
Many consider ten years to be a lifetime away, but it will, of course, come around eventually. An interest-only loan may delay reality for a period of years, but you should be aware that you are going to have to pay the full amount back one day, in addition to a hefty sum accrued over the interest period. Always think of the total amount repaid when considering opting for an interest-only loan rather than the eye-catching, attractive monthly repayments.
What if you already have an interest-only mortgage and are approaching the repayment part?
Those of you who already have an interest-only mortgage and are approaching repayment should be vigilant to the fact that it’s been ten years since the recession. As a result of this, house prices have fallen and many may be in negative equity, meaning that there could be serious financial implications including insolvency, bankruptcy and asset seizure should you not be able to meet repayments. If this happens, you can rest assured that Bell & Company will be right by your side to provide high-quality services and advice regarding debt management, personal and business insolvency and business turnaround to remedy your situation.