Interest only loans

With an Interest only loan, your repayments cover just your interest - not the principal. Only at the end of the agreed period of your Mortgage do you repay the principal and then you repay it in full.
 
Pros & Cons of Interest only loans

The advantage of Interest only loans is that the monthly repayments are lower than for a normal "Principal and Interest" mortgage. The disadvantage is that you typically pay more in interest over the full term of the loan.

However most people who take out an Interest only loans sell the property well before the end of the loan term. Their plan is generally to keep the property just long enough to make an attractive capital gain (i.e. sell it for much more than they paid).

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