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| Interest Only Mortgages |
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| With an interest only mortgage,
your monthly payments to the lender cover only the interest on the
loan (i.e., they don't repay any of the capital). The full amount
of the loan has to be repaid to the lender at the end of the term. |
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| To ensure you can make this final payment,
you invest additional funds in investments which are designed to generate
enough (preferably more than enough) capital to repay the loan at
the end of the term. |
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| On the plus side, you can choose from a variety
of investment vehicles, some of which can have tax advantages. And
should you move or remortgage, your investment vehicle can usually
be reallocated to the new mortgage. |
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| However, unlike a repayment mortgage, the total
amount of your debt does not reduce over time. And there is no guarantee
that your chosen investment vehicle will grow sufficiently to repay
your loan (although you can usually top up your contributions to investments
as you go along if this looks likely to be the case). |
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Think
carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your
mortgage. |
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| Copyright © RT Financial 2006-08. All rights reserved. |
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