If you want to buy a house, what do you do? You look at a bunch of mortgage loans. What is the best type of loan for a house? That would depend on how much you want to borrow and how much interest you can pay. In general, the longer the length of the loan, the lower the interest rate you will be charged.
When it comes to different kinds of mortgages, there are two main ones. On the one hand, there are mortgages that only have to be paid back. On the other hand, there are loans that only pay the interest. Why don't I just tell you about the two kinds?
Now, there are two kinds of payments for repayment-only mortgages. If you choose to get a "repayment-only" mortgage, you will pay back both the principal and the interest each month. Sometimes, you can't help but feel like you're paying a lot more than you would with other types of mortgages. Well, I would tell you not to worry too much about it. The only reason it seems like you are paying more is because you are paying off more than just the interest.
So, let's talk about loans that only pay the interest. What's going on? Well, if you followed the mortgage market a few decades ago, you would have heard of endowment mortgages. Read on if you're not sure what an endowment mortgage is.
An endowment mortgage is a type of interest-only mortgage that requires the borrower to put money into an endowment fund or some other kind of life insurance policy. After that, the borrower only has to pay the interest that builds up on the loan. The endowment fund pays back the money that was put in. This is bad because the performance of the fund depends on how the market is doing. When the markets crashed in the 1990s, these problems became clear with endowment mortgages in the United Kingdom. During that time, a lot of mortgage holders lost money because their funds didn't do well, which hurt everyone.
Endowment mortgages aren't used as much as they used to be. But people still use other types of more stable interest-only mortgages. Should you get a mortgage that only pays the interest or one that you pay back? I think that's just a matter of personal taste. Both have their own good and bad points. Before you make your final choice, make sure you do a lot of research on the mortgage markets.
