Finance Articles

Mortgages. An Interest Only Mortgage: It Could Cost You More

Over 200,000 homebuyers in London during 2005 took out an interest-only loan according to the Council of Mortgage Lenders (CML). None of whom had a repayment vehicle in place and of these, 60,900 were first-time buyers.

There are no figures available for the total number of homebuyers with interest-only loans. However, figures for new interest-only house purchase loans have been running at between 10 and 20 per cent for all new first-time buyers over the past 10 years, and roughly the same for other homebuyers.

With more than half of all mortgages now arranged through an intermediary, mortgage brokers could be in the firing line for claims of mis-selling if the homebuyer's loan reaches maturity and there is not enough cash to pay off the loan.

The CML is keeping close tabs on the situation and has set up a shortfalls working group to look into ways of encouraging consumers to act now to address any shortfall on interest-only mortgages.

"We are suggesting that when a mortgage comes up for review, for example, when it reaches the end of a concessionary rate, then it would be prudent to check on how the borrower intends to repay the loan," said a spokesperson for the CML.

Using an interest-only mortgage will keep your monthly payments down until you can afford the higher monthly payments of a repayment mortgage.

But because you're not paying anything off the amount you owe, you will probably end up paying more interest in the long run.

Interest only mortgages are a high-risk strategy that could come back to haunt advisers that set up the arrangement. An increase in interest rates could also hit these clients hard as they would have no fall-back option of reverting to an interest-only mortgage.

Simply enough, to combat the issue clients must be told that if they can not afford to pay for a mortgage, don?t take one out.

Here?s what you need to know. With an interest-only mortgage your monthly payments only cover the interest on the loan and do not actually pay off the loan itself.

If you take this option you will need to make separate arrangements to pay off the loan when the mortgage ends. You can make your arrangements through your lender ? but it isn?t compulsory.

If you don't arrange the funds at the end of the mortgage you may very well lose your home. Essentially, the money you pay to the interest only mortgage goes no where ? you may as well rent.

You will have a substantial amount of time (depending on the actual agreement) to save regularly in order to make payments into a savings or investment scheme in order to build up a lump sum to pay off the mortgage when the time comes.

However, the returns offered by banking or building society accounts are usually too low to be used to pay off the amount borrowed.

Instead, it is common to accept some risk in the hope of a higher return by choosing schemes where returns are linked to the stock market. Although the risk is with these stock market linked schemes, there is no guarantee that your money will grow enough to pay off the mortgage in full by the end of the mortgage term.

Another option is to change to a repayment mortgage later. This might be a suitable option if your earnings are low now but are expected to be much higher in future.

Using a lump sum from somewhere else such as an inheritance or selling something such as another property or a business is another option and is also a risky one. You need to be sure that the inheritance will materialize and think about what would happen if your business was to fail.

Selling the property to pay off the loan is probably your last option. This is suitable only if you won't need to live in the property such as if it is a buy-to-let property or a second home, or you are buying something cheaper.

Whatever plans you make to repay your mortgage, remember to review them from time to time to make sure that they are still on track. In the first place, interest only loans should be a last resort and should always only borrow what you are guaranteed to be able to pay back.

Great mortgage articles from mortgage gogetter http://www.mortgage-gogetter.co.uk

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

Mortgage Loans - Move In Right Away
So you have found the house of your dreams and you need finance fast before it slips from your fingers? As opposed to traditional mortgage loan lenders, there are online home loan lenders willing to approve a home loan in a considerably shorter period of time and with significantly less requirements. Learn that getting a home loan without delays or hassles is really possible.

Different Types Of Interest On A Mortgage
One of the most confusing parts of getting a mortgage and buying your own home can be the interest rates From the myriad of choices available to how the interest is actually worked our, it can quickly become confusing if you?re not sure what it all means

Adjustable Rate Mortgage - How They Work?
How does an ARM work.The borrowers interest rate is determined initially by the cost of money and the time the loan is made.

Potential Risks of a Bi-Weekly Mortgage
At first it might sound like a really good deal, a way to pay off your mortgage in advance, while at the same time reducing the amount that you have to pay at any single point. Bi-weekly mortgage companies are growing in popularity due to their convenience and the savings that they seem to offer over a person's standard mortgage, but just because they are becoming a more common payment alternative to regular monthly payment doesn't mean that they are without risk.

Insurance Accounting Software: How To Get The Best One
Insurance business has developed and prospered by leaps and bounds in the last few decades. This has not only made their transactions big but have also made them a little more complicated with new insurance policies being launched every day. There are specific business requirement for insurance companies. So, software engineers have produced a number of software for insurance companies.

What Every Homeowner Should Know About Mortgage Fraud And Identity Theft
Identity theft professionals are becoming greedier and more proficient at their ?game.? Identity theft is no longer limited to unpaid credit cards, small credit loans, but with the booming real estate market there is fast cash there for the conniving individual to make.

Wall Street Corporate Finance Academy Offers Low Cost Training for Students & Professionals for Investment Banking and Private Equity
Wall Street Corporate Finance Academy (WSCFA) is a financial training firm that offers Live Training, Corporate Training, University Training, Web Training and career coaching for Investment Banking and Private Equity. Trainings are run as an analyst/associate training program and are taught by experienced professionals with years of Wall Street experience to enhance your skills in valuation, financial modeling and job preparation.

How To Get The Best Used Car Finance Deal
When getting the best used car finance deal then it really does pay to shop online with a specialist motoring website. You can allow them to get the best deal possible on your behalf. A specialist will be able to find lenders you cannot reach and are able to shop around and gather quotes from within the car loans marketplace.

True Colors of Mortgage Refinancing UK
True Colors of Mortgage Refinancing UK

CRA Qualified Investment Fund Bond Purchase Supports Award-Winning Mixed-Use Development in San Francisco: Environmentally-Sound Mission Creek Com
San Francisco, California's Mission Creek Senior Community, a mixed-use project funded in part by the CRA Qualified Investment Fund was recently named 2007's "Best Urban Project" by readers of Affordable Housing Finance, one of the nation's leading publications for developers and financers of affordable residential development. The award-winning project is home to 140 apartments for low-income seniors, as well as a number of community resources, including an adult health center, community room, and public library branch.

Titan Lenders Corp. Launches Mortgage Industry Insights Blog: Recognized industry professionals focus on regulatory issues, best practices, lending
Titan Lenders Corp., a mortgage back office fulfillment services provider specializing in closing, funding, and post closing services, has launched its mortgage industry insights blog at http://titanlenderscorp.com/blog. The blog, featuring commentary on myriad current issues, including industry trends, best practices, ethics and legislation, has been launched to provide information and innovative thinking for mortgage industry professionals, analysts and media.

Things You Need To Know When Refinancing Your Second Mortgage
It seems like refinancing has become very popular in recent years due to the low interest rates currently available. Many people who bought their homes several years ago at a 9 or 10 percent interest rate have happily saved thousands of dollars by refinancing at 7% interest rates or lower. If you choose to refinance your second mortgage, you may also be able to shorten the length of your loan and pay the same monthly payment but at a lower interest rate.

Mortgage Payment Cover, One Of A Family Of Payment Protection Insurance Policies
Mortgage payment cover is just one form of protection against losing your income In this case, your monthly mortgage repayments are protected against you losing your income

Atlas Announces International Film & TV Finance Summit - East Coast Edition
The Film & TV finance market is jolting turbo speed ahead - are you prepared to keep up the pace? Here's the opportunity to accelerate your speed at Atlas' 2008 New York International Film & TV Finance Summit on September 23rd & 24th at the Regency Hotel in New York City.