Tuesday 25 April 2017

interest only

siryan@independent.ie

We're struggling with our mortgage due to a major salary cut. Would it be possible for us to switch to an interest-only loan until things get better on the money front?

LATEST figures indicate that 30,000 people have switched to interest-only mortgages from the traditional capital and interest variety.

The repayment is lower, and you may avoid immediate financial difficulty, but the capital portion will remain unpaid in a falling market.

That banks are willing to indulge them at all shows they are concerned at the level of debt being incurred by customers but the current 12 month moratorium means they are unable to instigate repossession orders in the normal manner.

Interest-only mortgages were once the beloved vehicle of investors but when it comes to the family home, you should approach them with a lot of caution.

First of all, interest rates will rise, so any saving that you see at present will be diluted.

In the short term, interest only is probably the least worst option, but the bank is unlikely to allow you sustain this over the entire term, given the slump in house prices.

Some banks may also be using the opportunity to take customers off their tracker mortgage deals before they move the customer to the interest only facility.

Frank Conway of Irish Mortgage Corporation recommends you first prepare a full income and expenditure statement which the bank will generally want to see as justification to agreeing to their interest only request.

Then, make absolutely sure you have no other option such as extending out your term, especially if you have a tracker.

Irish Independent

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