Money News
In June this year, a record number of of first-time buyers took their first steps onto the housing ladder using an interest-only mortgage. According to the latest figures from the Council of Mortgage Lenders (CML), 29% of first-timers opted for this type of repayment plan but only 8% of these borrowers showed lenders they had a repayment vehicle in place.
While it is understandable that first-timers will try to cut costs wherever they can, if they have no strategy to repay the capital of the loan, they could be storing up some serious trouble for the future. Buyers who have not organised a repayment plan will be faced with two options at the end of the repayment term; take a further mortgage for which you may or may not qualify by then, or sell your home to repay the lender the capital.
You may have some equity but as this means house prices have gone up, it won't be sufficient to buy another home. And if house prices have gone down, and your property is worth less than you are required to pay up, you could lose your home and owe money as well! Not a nice position to find yourself in when you reach your mature years.
READ MORE: TAKING AN INTEREST IN THE FUTURE?
24 August 2007 © Moneyextra.com
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