Take the Pressure Off with Low Start Mortgages
Cheap payments for the first few years?
Traditional Low start mortgages are no longer available but there other options available to try and reduce your mortagge payments in teh first few years of a mortgage . They were designed to take the pressure off monthly mortgage payments in the initial years of the mortgage. A low start mortgage is usually only offered as part of a repayment mortgage.
The first few years were paid on an interest only basis, no other investment vehicle is required to cover this interest only period. The monthly payments are then worked out so that the mortgage is repaid over the agreed term. For example, if the borrower took out a 25 year term mortgage with 3 years interest only they are effectively taking out a 3 year interest only mortgage which will turn into a a 22 year repayment mortgage after the initial term.
The drawbacks of this type of a low start mortgage are your monthly payments will dramatically rise after the interest only period has finished and during the interest only period no capital will have been paid. This sort of mortgage product is suitable for somebody who is anticipating a rise in salary in the future. On the otherhand if finances get worse over this period financial difficulty could result.