What Are ISA Mortgages?
Hot Topics
- How Much Can I Afford?
- You have to be very careful when buying a house to be sure that you will be able to afford the monthly mortgage repayments – as you risk losing your home completely if you find you simply cannot afford it.
- What Happens If Interest Rates Change?
- If you have some form of fixed interest rate mortgage you will be unaffected by changes in interest rates. Otherwise you can expect a change in the rate of interest charged on your mortgage.
- Can I Take A Break From Making My Mortgage Repayments?
- The ability to take a break from mortgage repayments is a feature of the Flexible, Current Account and Offset mortgages.
- What Happens If There’s A Shortfall At The End Of My Mortgage Term?
- There has been a lot of publicity lately about endowment policies that have not been sufficient to pay off the mortgage at the end of the term. As an investment vehicle for new customers, they are virtually obsolete, as with a fluctuating economy there is no guarantee that the resulting balance will cover the mortgage requirements.
- What are 100% Mortgages?
- Most mortgage lenders will only offer a 90% loan to value, that means that they will only loan you 90% of the properties value. First time buyers find this particularly problematic because they need to save up there 10% of the properties value before they can complete on their mortgage.
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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