Interest-only mortgages can improve cash flow, expert says
News Category: Industry News
Published: 27-Nov-2008
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The main benefit of interest-only mortgages is that they can help improve cash flow by ensuring lower repayments during the first couple of years of borrowing, an expert has said.
In advice which could interest landlords and letting agents considering rental software, YourMortgage.co.uk editor Barnet McCarthy commented that because borrowers only pay the interest off rather than the capital arrears, they benefit from cheaper repayments.
"It can help out with the cash flow for the first couple of years but it shouldn't be relied on too much longer than that," he said.
Mr McCarthy advised those considering interest-only mortgages to have a repayment vehicle set up or at least plans to have one in place.
According to research by Standard & Poor's, during the last two years in the run-up to the credit crunch, some 88 per cent of buy-to-let mortgages were taken out on an interest-only basis, with almost half of these featuring a loan-to-rate value of 80 per cent or more.
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