With a Repayment Mortgage, you pay both interest and capital each month. Initially, this appears more expensive, but does mean that you pay back the loan with no debt outstanding at the end of the term on the reasonable assumption that you meet the required payments on time.
Why the recent attention to these repayment options? Simply, because many borrowers who stepped onto the property ladder chose the cheaper monthly payment (interest only) promising to review their payment plans at a later date. The problem is that the ‘later date’ never seems to arrive! As we all know, people generally live within their means. Many borrowers on this scheme have no savings or viable plans to pay back the debt and this is worrying!
That said, Interest Only mortgages can be right for certain professions – people entitled to annual bonuses: the fluctuating income of self employed: or employments where lump sums are received after a number of years in service. It is not an exact science however and every case is different.
Arranging a repayment vehicle for an Interest Only loan is not a job for ‘tomorrow’. As we all know, tomorrow never comes. So, do it now! Sort out a plan of action and put it into motion. Speak to your current lender or mortgage broker and review the options available to help you achieve repaying the loan over a specific time period. But don’t delay…the clock is ticking!