Interest Only Mortgages Going?
Since the recession took a hold in 2007 over 250,000 homeowners have changed their mortgages from a repayment mortgages to interest only mortgage, this is largely due to the fact that many borrowers were in arrears or were experiencing financial difficulties or perhaps redundancy.
Most borrowers would want an interest only mortgage not just because it is more affordable, it also gives much more flexibility for borrowers repaying the main capital debt.
Many mortgage owners use annual bonuses or ISA’s to repay any outstanding capital, the savings are quite substantial, for a £200,000 house borrowers can save up to £300 per month by only paying the interest only.
The only other way of reducing mortgage repayments is to extend the mortgage term.
With house prices pretty stagnant at this moment many mortgage lenders are not keen on remortgaging properties to interest only as there is a real risk of negative equity, only if there is considerable equity in the property will lenders even consider such a scheme. Only in cases where borrowers are really struggling will they even consider interest only repayments and only as a short term solution.
It seems that Interest only mortgages are beginning to become a thing of the past, but while there is still a demand and a need, there is still life in the old dog yet