When moving home, the type of mortgage that you choose can depend on a number of factors.  In the past, many people have used an interest-only mortgage so that they can purchase a property, which is perhaps beyond what that their means should enable.  This is financial bad practice because when the property prices dropped from 2007/2008, many were unable to move on to another mortgage product because they had not decreased the amount of loan that they owed.  Many people are living with a position of negative equity whereby the amount they owe is actually more than their property value.  It’s important to think the implications of taking out interest-only mortgage and not just the monthly saving.  

Having said that, there are situations where interest-only mortgage is the best solution.  For example, if income is seasonal and subject to large variation, interest-only mortgages are often a good solution as that allow for overpayments on the mortgage.  Therefore payments can be kept low when income is low, and then a borrower can increase payments, and make lump sum payments, when their income increases during more profitable months. 

We suggest you take advice as to whether the interest-only mortgage is the best option for you.  It is crucial that you have a method of repaying the loan so that at the end of the mortgage term, you’re not left with the outstanding balance.