Is an Interest Only Mortgage Right for You?

With an interest only mortgage your monthly payments only pay the interest charged on your loan so you are not actually paying off any of the capital you borrowed. You should have a plan in place which will allow you to repay your mortgage at the end of the term. For example, savings, investment or downsizing (where you sell your property and buy a cheaper one). It may also be suitable to change to a repayment mortgage in future.

• If the savings or investment plan you have in place performs well, you could pay off your mortgage earlier compared to a repayment mortgage.
• Upon the full mortgage term, there may be spare funds left over from your repayment plan.
• As you are only paying off the interest charged on your loan, your payments may be lower than with a repayment mortgage where you pay off a combination of interest and capital debt each month.
• If you are anticipating a larger income in the future, an interest only mortgage enables you to afford to buy a property now and move onto a repayment mortgage later.

• Investments or saving plans are not guaranteed to repay your mortgage in full. At the end of the mortgage term you are responsible for repaying the debt in full.
• Lump sum payments or changing to a repayment mortgage may not be possible if your circumstances change preventing you the ability to afford the increased amounts.
• Downsizing will not guarantee repayment of your mortgage as, even if you have enough equity now, house prices could fall leaving you with insufficient equity to repay the loan.