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If you're looking at shared ownership mortgages as a way onto the property ladder, you need to know the great benefits that you will be getting. These pros are valid for both first time buyers and business owners. And you should not be scared, as these types of mortgages can significantly benefit you. But, again, there are a lot of mortgage lenders from which you can choose. As for interest only mortgages, as you can probably tell from the name, you only pay the interest.
They allow you to pay a monthly fee that covers the interest on the borrowed money. The great plus here is that the initial payments are way cheaper because you are not obligated to pay the total amount you borrowed. Interest-only is usually considered one of the best options if you're looking in this direction because you could pay off your entire loan if you sell the property. Most of the time, you even get a small profit.
Number One Positive When It Comes to Shared Ownership Mortgages
There are many positive aspects to shared ownership mortgages. First of all, it could enable you to get onto the property ladder where you wouldn't have had an option before. To put it into perspective, you can use shared ownership as a "stepping stone." By doing this, you get a fantastic deal. Typically buying a lower share, say 25%, and then paying rent on a property that is essentially the same price if you were buying it outright could lead to a lower monthly payment. Doing this means that your affordability is improved.
Second of all, this will make it possible for you not to spend a considerable portion of your income just on a mortgage while having the same benefits as you would with a standard one.
Over time, your wage or salary may increase. If you are currently single and view shared ownership from this perspective, you should consider this a variable. Maybe in a little while, you meet someone and therefore move to another property. Even though you own a small share, in theory, you would be reducing the mortgage debt, so your equity increases all the time. This increase will lead to a better deposit for the next property.
As mentioned before, many mortgage lenders are on the market, even high street ones. But no matter how many lenders there may be, you should never forget that a mortgage broker is God-given in these situations - moving on to maybe the most critical question, the mortgage rate. Knowing you will never get penalized with a high mortgage rate is essential. The rates are fantastic. They are equivalent to the lowest rates on the market.
Are Shared Ownership Mortgages Worth It?
Shared ownership mortgages could be your best friend depending on where you are in life and what kind of lifestyle you lead. That means you will essentially buy a part of a property while the other amount will continue to be owned by a Housing Association. Many people get scared when they find this out, considering it a flaw or a con in the deal.
However scary it might sound, these shared ownership mortgages can prove helpful, especially if you are single or part of a young family just starting. You will essentially live in an excellent place, paying half the price. And the best part is you get to own half of it. If you decide to sell the amount you own, you can even make some profit after paying off the mortgage.
This kind of mortgage based on sharing is a more accessible and affordable road to becoming a house owner. You should, however, always consider a mortgage broker. A mortgage broker is an experienced individual who knows everything about mortgages and the process of getting one. They can make the process easier. They can explain every step in great detail, and they will work incredibly hard to ensure you have a comfortable experience.
Things You Have to Know About Interest Only Mortgages
Say you have a property worth two hundred thousand pounds and borrow a hundred thousand pounds from a bank. Most of the time, a residential mortgage, is on a repayment, so if you have a 25-year term, at the end of the 25th term, you will be left with a zero balance. With interest only mortgages, you only pay the interest. Only paying the interest means that your balance always remains the same.
The interest only mortgages are a smart option with buy-to-let mortgages. However, it would be best if you always remembered it's an investment property. Investors mainly want to gain something, so if you have to make a repayment, you will not have a very positive cash flow compared to interest only mortgages. However, this option proved better for people looking to invest long-term.
A great thing to remember is there are no minimum income criteria needed. You will only need to prove that you can afford the equivalent repayment mortgage. The payments are usually fixed for an initial period, between 2 and 10 years.
The Key Advantages of An Interest Only Mortgage?
The essential advantage of this type of mortgage is mainly the cash flow. Say you paid a thousand pounds; out of that thousand, maybe five hundred pounds represents the interest, and the other five hundred represents the capital. If you are paying a repayment mortgage, you will need a thousand pounds. When choosing a mortgage like this, you only pay the interest, which in this case would be five hundred pounds.
Most of the time, people choose this option as the safer option when they are on the mortgage market because they find the interest only paid less than the actual rent, even less for living in the same property. This unique trick is the main advantage and the real reason why the interest only mortgage is desirable in many people's eyes.
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Published on August 26, 2022
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