High Court finds discretion is not always the better part of valour

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In a concerning case for borrowers, the High Court has ruled that a lender's discretion to demand full repayment of a loan means exactly that. The particular case before the court concerned a mortgage contract which was secured as a charge over a Grade 1 listed building in central London. Funds were being loaned on an interest only basis, and were ...
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295 Hits

How to get on the property ladder

How to Get on The Property Ladder
It has been well publicised that getting on the property ladder is becoming a more difficult proposition for first-time buyers as lenders abandon the standard model of 10% deposit and a mortgage. We take a look at some of the alternatives on the market for purchasing that elusive first property. ​ SHARED OWNERSHIP Shared ownership involves purchasi...
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1314 Hits

Interest-Only Mortgages – Stirring Up Future Trouble?

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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.

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333 Hits

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