Anyone got any views on interest only mortgages

B

bothered

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We are considering buying a small apartment in France. There seem to be
3 different types of French mortgages. (a) Interest only (b) Interest + investment, which seems to be a type of endowment mortgage, which has had bad press, and the (c) Standard Interest and Capital Mortgage.
The repayments on b + c are quiet high. The repayments on the Interest only loan are quite low and it would feel more comfortable, and by renting this out we could certainly cover our costs, i.e. local taxes, mortgage repayment, insurance, updating the apartment etc. But being born in the olden days with a mentality of "If you cant pay for it, dont buy it" I find it difficult to get my head around this. If we opted for this we could comfortably do this, and nearing retirement age we need that comfort factor. But when the term of the loan is up, do you just roll it over and take out another loan? You would have to sell it after the loan period or come up with the capital. I know investors do this all the time, and seem quiet happy to do this. All views welcomed.
 
Interest only mortgage means that you pay the interest for a defined period of years and thereafter, the principal must be paid back. You can get interest only for 5/10/15/20 years, but at the end, you still owe the original principal.

If you can only barely afford interest only, then perhaps property investment is not for you. What happens if you have void periods, if interest rates go up, if taxes come into play, if you want to sell and are stuck in one of the leasback schemes for 9/11/18 years?

Interest only is great, if capital value increases, because then when property is sold and bank paid, there is surplus for you. If property declines, you still owe 100% of the original amount.
 
ClubMan,
I read Brendan view on the above subject and i will say it is very useful for people like me who are getting into investment property market.
Can you please forward more of such link?
 
Thanks a million for that link, Clubman.
Sound words. Interest only makes more sense now.
 
Ravima said:
Interest only mortgage means that you pay the interest for a defined period of years and thereafter, the principal must be paid back. You can get interest only for 5/10/15/20 years, but at the end, you still owe the original principal.

If you can only barely afford interest only, then perhaps property investment is not for you. What happens if you have void periods, if interest rates go up, if taxes come into play, if you want to sell and are stuck in one of the leasback schemes for 9/11/18 years?

Interest only is great, if capital value increases, because then when property is sold and bank paid, there is surplus for you. If property declines, you still owe 100% of the original amount.
Click to expand...

Ravima
Just to make a few points.
I never mentioned Leaseback
Never said we could only barely afford interest only, said we would be more comfortable with interest only repayments, who wouldnt as they
are alot less. Its good to get a few viewpoints.
 
bothered said:
Never said we could only barely afford interest only, said we would be more comfortable with interest only repayments, who wouldnt as they
are alot less.
Click to expand...

It's only my opinion but I think you should only go for interest only if you cannot afford a "normal" mortgage. I fail to see any upside other than affordability?
 
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