According to My Mortgage Direct, there has been a marked rise in the sale of interest-only mortgages along with the recent rises in the housing prices and interest rates. About 35 per cent of its clients have chosen interest-only mortgage deals since the beginning of 2004.
However, interest-only mortgages or the interest-only payment mortgages could not be the right choice for all types of borrowers. These mortgages might land you in serious trouble when the time for the payment of the principal amount arrives.
Even though an interest-only mortgage loan helps you reap the benefit of only paying the interest on the Mortgage for a set period of time, it is a high risk option for the long term since you cannot be sure of your financial condition at the point of time when you have to repay the remaining principal mortgage amount. Hence, it is essential for consumers to be fully aware and cautious about all aspects of the seemingly attractive interest-only mortgage before opting for it.
People generally get lured into interest-only mortgages and believe strongly that they will be in a better position in the long run to repay the loan. However, nothing can be confidently said about what the future market holds.
The present slump in the property markets has imposed further doubts on the repayment issue of interest-only mortgages. According to the Halifax, property prices in February were just 0.8 per cent higher than in July 2004, while the Office for the Deputy Prime Minister revealed just yesterday that house prices had fallen by 0.1 per cent from December to January.
Thereby, customers relying on their houses for clearing their debts are bound to find themselves at a complete loss if the property rates do not head for a rise and the interest only mortgage will only become an expensive liability to handle.
Posted
on : Wed, 16 Mar 2005 00:00 GMT | Mortgages News
By : Pippa Fielding
|
