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by: ChrisClare
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If interest only mortgages sound enticing, keep in mind that they can also be very dangerous if you don't have a suitable repayment plan in place. This article in no way recommends that you should acquire an interest only mortgage. If you do, however, it is your responsibility to make sure you know just what you're getting into if you acquire one, and that you take the risks they present very seriously.

When choosing a mortgage there can be many different things which you have to weigh up beforehand, none least is that of the overall cost. When all said and done if you cannot afford the mortgage then the whole thing tends to be a bit of a none starter.

There are many different ways to adjust what your overall monthly mortgage payment is going to be. For example, a short discounted rate is always going to be cheaper than a long discounted rate. The same holds true for fixed rates. The shorter their repayment period, the cheaper they're going to be for you.

If you want to reduce monthly payments, you can change the overall terms of the mortgage. If you shorten the mortgage term, then your monthly payments will increase. This is because when you shorten the time over which your mortgage is repaid, your individual payments are going to increase correspondingly. By contrast, if you make the mortgage repayment term longer, then your monthly payments will drop, because you're taking longer to pay what you've borrowed back.

Perhaps the most obvious way to reduce your mortgage cost is to simply borrow less. Why is this so? Simply, this is because if you borrow less, you have to repay less. For some people, borrowing less is not something they would consider an option because they want a particular property, which costs a certain amount. Therefore, they would not consider a cheaper property that would therefore result in them having to borrow less money. There is a solution to this problem that you can consider.

Interest only mortgages are just that. These are mortgages wherein all you pay month-to-month is the interest on the principal you've borrowed. Now, of course, your payments are going to be lower by as much as 25%, but keep in mind that you aren't paying back any of the money you originally borrowed. And because your monthly payments are so much lower, this looks like it can save you a lot on your monthly expenses.

However, by doing this, you're not repaying the loan you originally borrowed. If you do this, you are in some ways cheating the system because the loan amount you actually borrowed is going to remain outstanding for the entire time you owe the debt. If you don't do anything until you reach the end of your mortgage, keep in mind that you will still owe the entire amount of your original debt to the lender at the end of your mortgage.

It is fair to say that there are some very genuine reasons to arrange an interest only mortgage one of the main ones is if you are expecting a lump sum of money in the future such as an inheritance or the maturity of an investment. In these cases it is more than fair and appropriate to arrange an interest only debt on the basis that you know were the money is coming from to repay it.

However, some people acquire interest only mortgages with no such resources in sight. Some people do this because they truly do not have the financial resources to pay a regular mortgage or are in financial difficulty, but still want the property they acquired. They arrange to have an interest only mortgage so that they can have the house they want. If this is your situation, I suggest you give yourself a time limit with your interest only mortgage. At the end of that time, say five years, you set yourself the goal of changing your mortgage to one that is traditional, where principal is paid along with interest when you make your mortgage payments. If you don't make a plan like this, you're going to owe the entire principal at the end of your mortgage term. Therefore, you need to make sure that the principal is going to be repaid at some point if you wish to stay in your home.

So to summarise, if you really must take out an interest only mortgage, you should do so with full knowledge of what that entails. You must know all of the pitfalls and drawbacks inherent in interest only mortgages. If you are not receiving a lump sum of money during the mortgage term whereby you can pay off the entire loan amount at one time, you should have a goal to begin to pay principal on the mortgage after a period of time along with the interest. You must do one of these two things if your decision to acquire an interest only mortgage is to be a smart one.

About the Author

For lots of help and advice on interest only mortgages why not visit to MortgageRoute.co.uk quality mortgage advisers online

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