Interest-only mortgages ‘can help lower costs’

Interest-only mortgages can be beneficial to people looking to lower the overall cost of borrowing to buy property.

That’s according to Bernard Clarke, spokesperson for the Council of Mortgage Lenders, who said that certain buyers can find this type of loan a good option.

“It’s a clearly an option for buy-to-let investors who usually want to minimise their borrowing costs and are not interested in acquiring ownership of the property outright,” he said.

But for homeowners who would like to start repaying the bulk of their loan, an interest-only mortgage should be reviewed somewhere down the line.

“If they take an interest-only option to reduce their initial costs but do want to eventually own the property outright then they do need to think about transferring to an interest and capital repayment mortgage,” said Mr Clarke.

Alternatively, buyers can utilise separate savings or investment plans in order to save up the money to repay the capital.

“People are free – if they are taking out an interest-only mortgage – to choose alternative repayments vehicles,” Mr Clarke explained.

Tags: Council, order, capital repayment mortgage, interest-only option, investors, interest