On a 25-year term, a £200,000 loan with a 3% interest rate would require payments of just £500 compared to about £950 with a repayment mortgage.
And if you have spare cash available, you could help pay off the debt quicker by increasing your monthly payments.
In the final years, much of the payments will go towards paying off the remainder of the debt.
All in all, if you meet the criteria for an interest-only mortgage, it can help you keep your monthly expenses down in the short term.
In the final years of the mortgage term, more of every payment will go towards clearing the debt, and less towards interest.
Unless you intend to sell the property at the end of the mortgage term, the idea here is that you can invest or save the difference into a repayment plan, which will ensure you have the cash to pay off the original loan amount.
In this post, you will learn about the key differences between these two mortgage products and how you should go about choosing the right product for you.
