There are many potential perils and pitfalls that a borrower can face when buying a home and taking out a mortgage. Many borrowers can fall foul of these perils due to misinformation or a misunderstanding.
Read on as we try to discover some common pitfalls facing the potential mortgage borrower.
Interest Only Mortgages
Interest only mortgages are becoming increasingly popular, especially with first time buyers looking to take that first step onto the property ladder. Although having an interest only mortgage will result in lower monthly repayments, it will not however pay off any capital owed on the mortgage.
Interest only mortgages do have there place in the market and can be extremely useful in times where money is very tight or when there is an investment vehicle in place to repay the outstanding mortgage balance at the end of the term. For most borrowers however, interest only mortgages do seem to be a false economy – no headway will ever be made into reducing the balance owed.
On the whole, an interest only mortgage should only usually be adopted on a short term basis before reverting to a Capital repayment type mortgage....
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