{"id":2066,"date":"2021-01-03T08:30:20","date_gmt":"2021-01-03T04:30:20","guid":{"rendered":"https:\/\/moneymall.ae\/credit-blog\/?p=2066"},"modified":"2021-01-03T08:30:20","modified_gmt":"2021-01-03T04:30:20","slug":"interest-only-mortgage","status":"publish","type":"post","link":"https:\/\/moneymall.ae\/credit-blog\/interest-only-mortgage\/","title":{"rendered":"What is an Interest only Mortgage ?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\"><strong>Interest only Mortgage<\/strong> is the type of mortgage repayments where you do not pay for principle for some specific time. The borrower is required to pay only interest on the mortgage and principal can be repaid in a lump sum at a specified time as per your contract.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This type of mortgage suits for the Buy-To-Let (BTL) buyers very well: It allows them to rent a property without the inconvenience of ever fully owning it.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The <\/span><b>Interest only mortgage <\/b><span style=\"font-weight: 400;\">is secured by a real estate that contains an option to pay the only interest which will reduce your mortgage payments drastically. But it ends up with a huge lump sum principal payments.<\/span><\/p>\n<figure id=\"attachment_2067\" aria-describedby=\"caption-attachment-2067\" style=\"width: 402px\" class=\"wp-caption alignleft\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-2067\" src=\"https:\/\/moneymall.ae\/credit-blog\/wp-content\/uploads\/2021\/01\/interest.png\" alt=\"interest only mortgage\" width=\"402\" height=\"402\" \/><figcaption id=\"caption-attachment-2067\" class=\"wp-caption-text\">interest only mortgage<\/figcaption><\/figure>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a23350993f6d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a23350993f6d\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/moneymall.ae\/credit-blog\/interest-only-mortgage\/#Advantages_of_Interest-only_mortgage\" >Advantages of Interest-only mortgage<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/moneymall.ae\/credit-blog\/interest-only-mortgage\/#Disadvantages_of_Interest_Only_Loans\" >Disadvantages of Interest Only Loans\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/moneymall.ae\/credit-blog\/interest-only-mortgage\/#Am_I_a_Good_Candidate_for_an_Interest_Only_Loan\" >Am I a Good Candidate for an Interest Only Loan?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/moneymall.ae\/credit-blog\/interest-only-mortgage\/#Paying_off_Mortgage_loan\" >Paying off Mortgage loan<\/a><\/li><\/ul><\/nav><\/div>\n\n<h2><span class=\"ez-toc-section\" id=\"Advantages_of_Interest-only_mortgage\"><\/span><b>Advantages of Interest-only mortgage<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><b>Interest-only mortgage<\/b><span style=\"font-weight: 400;\"> minimizes the monthly instalment amount by excluding the principal portion from a payment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Buyers can have a chance to increase cash flow that supports for managing monthly expenses.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For the first-timers, The <\/span><b>interest-only mortgage<\/b><span style=\"font-weight: 400;\"> will allow them to defer large payments into future years when they expect to have a higher income.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If a borrower qualifies for this type of mortgage there are multiple ways that help him. If the Most <\/span><b>interest-only mortgages<\/b><span style=\"font-weight: 400;\"> require only the interest payments for a specified time period, let it be 5 years. Up to this time, the borrower will pay only interests and when the time completes his loan will be converted to a standard schedule where the borrower has to pay the interest plus the portion of the principal.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some special provisions also allow the borrower to continue to pay interest payments in some circumstances.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Example: A borrower may able to pay a portion of the interest due to some damage occurs in the home where he needs to pay for maintenance.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There is also a provision where a borrower can make interest payments throughout the period of the loan. where he supposed to pay the principal amount in a one-time payment.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Disadvantages_of_Interest_Only_Loans\"><\/span><b>Disadvantages of Interest Only Loans\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A rise in mortgage rates will increase your risk<\/span><\/p>\n<p><span style=\"font-weight: 400;\">People tend to pay extra money instead of investing it.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If your financial plan not set as you desire you may not afford principal payments when the time arrives and many are not disciplined enough to pay extra toward the principal.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The home may not appreciate as fast as the borrower would like.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Am_I_a_Good_Candidate_for_an_Interest_Only_Loan\"><\/span><b>Am I a Good Candidate for an Interest Only Loan?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">From the above drawbacks you may alarm with the risk involved in it, So before stepping into it make sure that you are in this right option for your financial needs.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Check your current income is rather modest and is certain that income will increase in the future.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On opting <\/span><b>interest-only mortgage<\/b><span style=\"font-weight: 400;\"> makes sure that your other earnings used to toward other investments or principal payments.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If your income is irregular discuss the same with the bank that you have a flexibility of making interest-only minimum payments during times in which income is low, and makes larger payments during periods in which income is higher.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As per your savings commitment, only the mortgage lender will get some idea as to how you\u2019re going to pay off that lump sum.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Paying_off_Mortgage_loan\"><\/span><b>Paying off Mortgage loan<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Once you acquire the interest-only mortgage you are supposed to pay the principal amount at some point. For paying the loan amount the borrowers have few options:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some borrowers may choose to refinance their loan after the interest-only term has expired which can provide for new terms and potentially lower interest payments with a principal.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some other borrower may choose to sell the home to pay off the loan.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Many borrowers will choose to individually save the principal on the loan in order to make a one-time lump sum payment when the loan is due.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Interest only Mortgage is the type of mortgage repayments where you do not pay for principle for some specific time. 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