Mortgage Wizard

There are two types of mortgage; Interest Only and Repayment.

Those who want to repay the full balance off at the end of the term by paying off the capital and interest throughout the term of the mortgage
Those who want reduced payments by only paying the interest on the mortgage and leaving the balance outstanding. It is your responsibility to ensure that the balance is repaid at the end of the term. If the value of your house has increased enough, it may be possible to move the balance onto a lifetime mortgage

While most borrowers fall into the first category, Mortgage Wizard specialises in the second category. If you want your mortgage to be paid off at the end of the term, then a repayment mortgage is for you. However, if you don’t need a guarantee that the mortgage will be paid off at the end of the term, then an Interest Only mortgage may suit you better. Please don’t think that all Interest only mortgages need an endowment, they don’t! However, it is your responsibility to ensure that the loan is repaid in full at the end of the term.

So why would I, and people like me, prefer NEVER to pay off their mortgages? Here are some reasons:



Smaller monthly payments than repayment mortgages. This is because no capital is being repaid.	They clear the debt at the end of the mortgage period.
Re-mortgaging becomes less complicated. There isn't the problem of reducing the term but increasing the monthly payments.	If you have a cautious attitude to risk then repayment mortgages have no risk of a shortfall as long as all repayments are met.
Can become a useful part of Inheritance tax planning by keeping a debt on the home*.	They make sure the lender is paid if you live or die.
Is the preferable choice of those opting to buy property to rent out. They keep overheads low particularly in times when there are no tenants.	They are regarded by lenders as a "SAFE" mortgage.
The popular choice of those wishing to clear large credit card debt. Costly short term debt being replaced with cheaper long term debt. Be careful as adding existing debts to your mortgage may both extend the repayment term and increase the overall cost of the debt.

With Interest Only mortgages the balance does not reduce and at the end of the term the same amount will be outstanding.

*Mortgage Wizard cannot advise on Inheritance Tax.