A new Pre-Action Action Protocol for Debt Claims (the Debt Protocol) came into force on 1st October 2017. Subject to certain exceptions, the Protocol applies to any business, including sole traders and public bodies, claiming payment of a debt from an individual (including a sole trader).The Protocol does not apply though to business-to-business de...
The mortgage market today offers a wide range of products for your average and, not-so-average, house buyer. But just how risky are interest-only mortgages?
Whether you are a first-time buyer, multiple property owner or looking to help your children get onto the property ladder, there’s a mortgage out there for you. At least, that’s what we’re led to believe…
In fact, broadly speaking, mortgages fall into one of only two types - repayment and interest-only.
Under a repayment mortgage, your monthly payment will clear both the month’s interest on the loan and a small part of the capital. The end result being that, when the final payment is made at the end of your agreed mortgage term, you own the property free and clear.
Under an interest-only mortgage, the monthly repayments simply clear that month’s interest that has accrued, however, the capital (the original loan amount) remains untouched. At the end of your mortgage term, you will still have to repay the original loan amount, and the sum will be due to be repaid in full immediately.
Monthly repayments on an interest-only mortgage are typically cheaper than those under a repayment term. First-time buyers tend to opt for interest-only as they appear to be the more attractive, cheaper option. If finances are tight, some borrowers change their mortgage to interest-only, telling themselves at the time that it’s only for the short term and they will change back when finances aren’t so tight. People who do so are unlikely to put repayment plans in place due to the cost. Borrowers believe they will switch to a repayment mortgage when the current deal comes up for renewal, or when finances get easier. The reality is they never do because interest-only will always be the cheaper monthly option.