Mortgage
products evolve but this used to be available
in the UK:-
Below
is how the product worked.
In order to potentially pay less for a mortgage
overall, opt for less years. But, with a capital
repayment mortgage, your payments each month
will be higher. For interest only you will need
a repayment vehicle in order to pay back the
original amount borrowed this can be linked
to repayment vehicle pay out when the term is
finished.
A
long term may suit a younger borrower whom wishes
for example to stretch the mortgage over more
years using a capital repayment mortgage in
order to lower the monthly mortgage payments.
This means that the monthly payments can be
less than if the term were shorter however the
borrower will pay more in total if the loan
goes to the end of the mortgage term. The longer
you stay with a lender the potentially more
you will pay in total. Your should aim to reduce
your term.
This
problem may be over come by making overpayments
and lump sum payments. This reduces the term
of the loan to the lender depending on how much
is to be overpaid and how quickly payments are
made.
Caution
should be observed if the term extends past
your retirement as you may be unable to service
the loan with limited monies coming in from
a pension or just part time work.
A
long term loan maybe fixed, this potentially
may give you financial stability as you will
not be effected by changing interest rates provided
your income does not drop. This potentially
may override the boom-and-bust cycle which been
the situation in the past in the UK.
This
type of term may service the self employed who
have fluctuating incomes hence this would take
the pressure off in low income periods. Or may
suit people initially until their incomes rise.
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