What is an Interest Only Mortgage?

An Interest Only Mortgage is one where the repayments are made up entirely of the interest on the loan. When the mortgage term is complete, the capital originally borrowed is still outstanding.

To cover the balance, borrowers are advised to make regular contributions into an investment policy alongside their mortgage repayments. This can be arranged by the mortgage provider, most commonly in the form of an endowment mortgage, an ISA mortgage or a pension mortgage.

With this type of mortgage, the mortgage lender is advancing you money and asking you to do no more than pay the interest each month. In other words you are merely servicing the debt, and the amount outstanding on your mortgage will remain constant.

An interest only mortgage can be an excellent choice for some borrowers, who have a valid use for a lower initial required payment. The actual capital which is freed up to pay for your property can be invested into a long term investment fund, which, if invested carefully, ought to help pay off both your mortgage earlier than expected, and may even be used to cover the cost of your interest only mortgage payments.

With interest only mortgages, most borrowers take out some kind of savings plan to ensure that at some time in the future they will have enough money to pay off their mortgage and have the satisfaction of knowing that the bricks and mortar belong to them.

With an interest only mortgage, a borrower will invariably take out an endowment policy, a pension, or an ISA. In addition, it is always good practice to arrange adequate life cover to ensure that should the mortgage payer die the loan will be repaid in full.

With a repayment mortgage, you make monthly payments on the borrowed capital as well as the interest. With interest-only, however, your payments are made up of the interest alone, and you do not repay any of the capital until the mortgage term is complete. Because you are only paying back the interest on the loan, you will pay less each month than you would with a repayment mortgage.

If you do choose an interest only mortgage, you need to make sure that you know from the outset how you intend eventually to pay off your mortgage loan.

Each month you will repay interest on the amount borrowed, but at the end of your term you need to be able to pay off the remaining capital. This may be achieved by taking out an Endowment, Pension or ISA, which should provide you with the amount you need at the end of your mortgage term.

You must be aware that the value of investments plans can go down as well as up and are not guaranteed upon maturity. This makes an interest-only mortgage a more risky option than a repayment mortgage.

Your home may be repossessed if you do not keep up repayments on your mortgage.

You may freely reprint this article provided the author's biography remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

---

Google News Updated : Sat, 11 Oct 2008 05:49:35 GMT Paulson Indicates Need to Purchase Bank Equity `Soon as We Can' - Bloomberg Telegraph.co.uk Paulson Indicates Need to Purchase Bank Equity `Soon as We Can' Bloomberg - 1 hour ago By John Brinsley and Rebecca Christie Oct. 11 (Bloomberg) -- US Treasury Secretary Henry Paulson indicated that pumping government funds into banks is a priority and said financial markets will remain volatile. US planning to buy equity in financial institutions Reuters Treasury Weighs Investing In Banks Washington Post International Herald Tribune - MarketWatch - CNNMoney.com - Bizjournals.com all 1,783 news articles Publ.Date : Sat, 11 Oct 2008 04:21:05 GMT US Near Changing Stance on North Korea as Terrorist - Wall Street Journal BBC News US Near Changing Stance on North Korea as Terrorist Wall Street Journal - 1 hour ago By JAY SOLOMON WASHINGTON -- The Bush administration is hoping to announce as soon as Saturday that it is tentatively removing North Korea from its list of state sponsors of terrorism, in a bid to kick-start a stalled nuclear disarmament agreement, ... AP: US to remove North Korea from terror blacklist The Associated Press US May Remove North Korea From Terrorism List, AP Reports Bloomberg Los Angeles Times - Voice of America - Financial Times - The Miami Herald all 1,714 news articles Publ.Date : Sat, 11 Oct 2008 04:02:40 GMT G-7 Commit to `All Necessary Steps' to Stem Global Meltdown - Bloomberg Voice of America G-7 Commit to `All Necessary Steps' to Stem Global Meltdown Bloomberg - 1 hour ago By Simon Kennedy Oct. 11 (Bloomberg) -- Group of Seven finance chiefs, meeting after stocks plunged and as a global recession looms, vowed to prevent the failure of vital banks while failing to unveil new initiatives for thawing credit markets. Group of 7 Nations Seek Coordination in Rescue New York Times In latest bold step, Treasury will buy bank stakes The Miami Herald CNNMoney.com - The Associated Press - Boston Globe - FN Arena News all 890 news articles Publ.Date : Sat, 11 Oct 2008 04:03:42 GMT McCain Lauds and Attacks Obama in Same Day - New York Times CBS News McCain Lauds and Attacks Obama in Same Day New York Times - 41 minutes ago Senator John McCain of Arizona and his supporters at a rally on Friday in La Crosse, Wis. By ELISABETH BUMILLER LAKEVILLE, Minn. - After a week of trying to portray Senator Barack Obama as a friend of terrorists who would drive the country into ... McCain Moves to Soften the Tone at Rallies Washington Post John McCain, speaking to supporters, tries to defuse an anti ... Los Angeles Times Reuters - DetNews.com - Austin American-Statesman - The Miami Herald all 304 news articles Publ.Date : Sat, 11 Oct 2008 05:08:14 GMT Democrats Are Gaining, Registration Data Shows - New York Times Los Angeles Times Democrats Are Gaining, Registration Data Shows New York Times - 2 hours ago By NICHOLAS CONFESSORE and GRIFF PALMER Some longtime Republican strongholds in New York are becoming increasingly Democratic, a striking change driven by demographic shifts, intense voter registration drives by Democrats and allied groups and sagging ... Campus registration drives in full swing KARE Ott, Hook face off for open county office St. Joseph News-Press The News-Press - Winston-Salem Journal - Tampabay.com - Beaufort Gazette all 739 news articles Publ.Date : Sat, 11 Oct 2008 03:20:33 GMT Genomics project unites four Wisconsin research institutions - Milwaukee Journal Sentinel Genomics project unites four Wisconsin research institutions Milwaukee Journal Sentinel - 19 minutes ago By KATHLEEN GALLAGHER Wisconsin’s four biggest academic research institutions will collaborate on an initiative aimed at giving the state national stature in the fast-emerging field of individualized medicine, Gov. Marshfield Clinic gets biggest donation yet Chicago Tribune Wis. governor unveils gene research triangle Forbes Bizjournals.com - GenomeWeb News (subscription) - WJFW-TV - WISN.com all 51 news articles Publ.Date : Sat, 11 Oct 2008 05:29:44 GMT Bush: US authority able to solve financial crisis - People's Daily Online Telegraph.co.uk Bush: US authority able to solve financial crisis People's Daily Online - 1 hour ago US President George W. Bush arrives in the Rose Garden at the White House to makes a statement on the economy in Washington, October 10, 2008. President Bush vows action on financial crisis Los Angeles Times Bush's Lullaby to the Markets Washington Post Birmingham Star - Wall Street Journal - CNN - Bloomberg all 1,302 news articles Publ.Date : Sat, 11 Oct 2008 04:12:49 GMT Clickbank Affiliate How to Earn Money At Home

PARLOT::Ebooks, Scripts, Websites, and more...

Adsense websites

Home Equity Loans ? A Big Benefit Or A Big Mistake?

When the bills are piling up and there doesn't seem... Read More

Private Mortgage Insurance (PMI)

If your down payment on a home is less than... Read More

Basic Tips for First Time Home Buyers

The first time you purchase a home is an exciting... Read More

Top 5 Methods to Manage Your Home Equity

As your home appreciates in value, you gain equity. You... Read More

Buying a House or a Home?

A house is just that, a house, until someone lives... Read More

Home Owner Loans Explained

How To Release Equity Locked Up In Your Home For... Read More

Using a Mortgage Refinance Company Online

Online mortgage companies make refinancing convenient and competitive. By researching... Read More

VA Loans, A Gift from Uncle Sam

Uncle Sam has a gift for the men and women... Read More

Why You Should Not Get Hung Up on the Interest Rates!!

This is what a mortgage can do for you!AND Why... Read More

Getting The Best Home Equity Loan

Owing to the popularity of home equity loans, there are... Read More

A Home Equity Loan - What You Should Know?

Asking yourself, "Is a home equity loan right for me?"... Read More

Obtaining a Home Equity Loan Online

Private lenders, banks, and mortgage companies are all setting up... Read More

How to Get a Cheap Homeowner Loan

If you're looking for a cheap homeowner loan, you might... Read More

Home Loans: What You Should Know!

Finding home loans can be a daunting task, whether you're... Read More

For Mortgage-Refinance Help, Get the Best Mortgage Professional, Not a Bank Loan Officer

When you need a mortgage -- either because you are... Read More

Home Loans and Mortgages ? The Selection Can Be Bewildering

For years, when someone wanted to purchase or refinance a... Read More

Home Mortgages: Should You Apply Now?

If you're thinking about applying for a new mortgage or... Read More

Change in Texas Law May Make Reverse Mortgages More Popular

Texas was one of the last states to allow homeowners... Read More

Mortgages - Which Loan is Right For You

When buying a home, you need to take a home... Read More

Reaping Financial Rewards ? Bad Credit Home Equity Loans

Home is the place you inhabit. It is the place... Read More

No Money Down Mortgage Loans - Ways To Get Approved For a Home Loan Online With Zero Down

No money down mortgage loans enabled more people to own... Read More

Bridging Finance Basics

Bridging finance is a short-term loan that is used as... Read More

Jacksonville Florida Real Estate Mortgage Home Loans - Get the Best Rate Everytime

There are hundreds of mortgage companies in the Jacksonville real... Read More

How To Find A Mortgage With Bad Credit

Shopping online for mortgages ought to be trouble free, even... Read More

Home Mortgage Rate Shopping - Why Some Shoppers Give Up And Others Dont

About 29% of current homeowners and a much larger percent... Read More