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Mortgages Explained >
Repayment Vehicles |
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When you have an interest only mortgage you need to ensure you
have a way of repaying the mortgage at the end of the term and
in this section we talk about the various ways that you can
repay a mortgage.
It should be noted at this point that if you have an interest
only mortgage all you need to do is ensure you have sufficient
funds at the end of the mortgage term to repay the debt. There
are no hard and fast rules as to how this should be done, for
example you could repay your mortgage from an impending
inheritance, however if you do intend to do this you should
proceed with caution as it can be fraught with problems wills
can be changed and contested etc. But the point still stands all
you need is to have a lump sum of money were it comes from does
not really matter as long as it is legal of course. You could
even just sell the property and repay the debt with the proceeds
of the sale, however you should also be aware that property can
fall as well as rise and for this reason don't necessarily bank
on the property being able to meet the debt.
The main ways that an interest only mortgage can be repaid are
:- Endowment, Pension, PEP (personal equity plan) not available
to purchase any more but some people still have old ones, an
ISA, a building society savings account or a bond.
Please note that these are in no way an exhaustive list of the
ways they are just some of the most common ways that people have
repaid mortgages in the past and continue to do so.
You will notice that probably, with the exception of the
building society account, all the above have a certain degree of
risk associated with them and for that matter if you do not save
enough money in the building society account that would present
a risk of being unable to repay your mortgage at the end of the
term.
It is for this reason that repaying a mortgage in this way
should not be entered into lightly. It should be carefully
considered and sufficient money should be set aside to achieve
the desired result. In addition you should always be prepared to
adapt you plans to cater for any under performance that takes
place during the term of the mortgage as failure to do so would
result in an inability to repay the debt at the end of the term.
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