Understanding some essential things about an interest home that is only will allow you to decide whether or not it is just the right payment choice for you.
A mortgage payment typically consist of two parts:
- The component that is principal the quantity you borrow (your loan balance)
- The attention component – the total amount the financial institution costs on the outstanding balance
Having an Interest home that is only, your minimum repayments will simply cover the attention costs on your own loan for an agreed period of the time.
What this means is your loan balance won’t reduce throughout the interest-only duration, as you aren’t making any principal repayments.
Interest levels for Interest home that is only are usually greater than Principal & Interest mortgage loans (where your payments cover both the main therefore the interest).