Mortgages. A repayment vehicle should be in place for an interest only mortgage. Part 2

Many mortgage advisers believe that interest only mortgages should only be

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used as a last resort when income is tight. That's because whichever investment vehicle the borrower decides on, the investment returns are never guaranteed and the investment ( cheap car insurance ) might not deliver sufficient capital at the end of the term to fully repay the mortgage. This means there's always an element of risk involved. For this reason, many advisers prefer to be sure and recommend a repayment mortgage where there is absolutely no risk of a shortfall.

Having said that, some mortgage advisers acknowledge that an interest only mortgage can be useful if the borrower plans to simply use the mortgage's lower repayments as a ( medical insurance ) temporary stop gap of say five years, and then switch to a normal repayment mortgage. Of course, the FSA's rules will still expect the borrower to show evidence that a suitable saving or investment plan is in place prior to releasing the funds for an interest only mortgage.

However, if advisers do recommend an interest only mortgage, most rightly recommend a scheme where the borrower can make penalty free overpayments. With these ( mortgage quotes ) schemes, the borrower isn't committed to making a higher monthly repayment, but as and when spare capital becomes available, lump sums can reduce the outstanding mortgage. There are lots of mortgage packages available like this and most allow the borrower to repay at least 10% of capital penalty free each year but check out ( cheap home insurance ) the details before you sign up for the mortgage.

Statutory Wealth Warning:
Your home may be repossessed if you do not keep up your repayments on a mortgage or any debt secured on it.