What Are ISA Mortgages?
Hot Topics
- What is a Mortgage in Principle?
- A Mortgage in Principle is a conditional offer made by a mortgage lender to verify that they will ‘in principle’ give you the mortgage loan you have discussed with them.
- Unusual Properties
- What happens if I have an unusual property?
- What Happens If I Am Refused A Mortgage?
- If you are refused a mortgage it will be because you have a poor credit rating and/or a bad credit history.
- What Are Capped Rate Mortgages?
- A capped rate mortgage puts a limit on maximum interest payable on your mortgage over a predetermined period. If the mortgage rate is BELOW the cap the borrow will enjoy the lower interest rate available.
- Equity Release
- Equity Release is a means of using the value of your home to receive either a lump sum of cash or regular monthly instalments.
If you take out an intrest only mortgage your lender will expect you to put in place a ‘financial vehicle’ capable of repaying your mortgage at the end of the mortgage term. There are several suitable vehicles in today’s market and these include endowments, pensions, and also ISAs.
Every month, with an ISA mortgage you will be expected to pay the interest on the loan, you then take out the ISA to build up a fund which will pay back your mortgage at the end of your mortgage term.
ISAs are the most flexible investment vehicle available in today’s market, you can’t stop paying into an endowment and start again, because you will be liable for penalty charges or may lose money to charges. With a pension mortgage, you can't access any of the fund until you are at least 50 years old so repayment of the loan is impossible till after this time. With ISAs, you can stop paying into them and start again with little or no penalty charges.
Note, taking out any form of interest only mortgage is far riskier than taking out more traditional types such as repayment mortgages. No type of investment is 100% secure and you could, potentially find your savings to be insufficient at the end of your mortgage term.
The advantage of the ISA mortgage is that you get tax breaks on the income invested in them, which makes them a more tax efficient vehicle than a endowment. Should your investment grow fast you may be able to pay off before the end of your mortgage term. The flexibility is also a good thing, as you can stop and start contributions at any time.
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