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When looking at a remortgage, it is often attractive to look at interest-only options. If you’re starting a business, it could be important to cut your monthly outgoings until your business income can get to a level that will sustain a larger level of outgoings. It could be that a situation has changed in the job environment or have you returned back to studying part-time and an interest-only option gives you the flexibility to again reduce your outgoings, to save some money, and then provide you the option to later get a move to a repayment mortgage so that you can again get to pay off the balance of your mortgage loan. If there is a good reason to remortgage on an interest-only basis, then interest-only mortgages can be a suitable product. Some people are however attracted to interest-only mortgages or remortgages because they reduce outgoings and allow them to spend surplus money on other non-essential items. Borrowers can end up manifesting bad financial practice by increasing outgoings on lifestyle purchases instead of paying off their mortgage. Similarly remortgaging onto an interest only basis due to finances being stretched may not tackle the cause of stretched finances Therefore, an interest-only mortgage can simply delay problems by increasing monthly surplus cash and not tackling the main problem whether it be mounting debt, unwise spending habits, or something else. An interest-only mortgage can require a lot of discipline. With repayment mortgages, month in month out you’re paying off a portion of the balance of the loan so that at the end of the term, all things being equal, your mortgage will be paid off and you will own your home. An interest-only mortgage often requires someone with more discipline, who can use another investment vehicle, such as a business, to enable them to build up a lump sum that will pay for the mortgage. If you look through forums, especially on interest-only mortgage risk, they are full of people saying that they didn’t have the discipline to overpay monthly on their interest-only mortgage and therefore, found themselves in a difficult financial position. They stated that interest-only mortgages only delayed their financial situation worsening.
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