Interest only mortgages, how do they work?

[nelly]

Intrest only mortgages, hw do they work?
we have approximatly 15% paid on our mortgage and are looking into the idea of buying a rental property.
Anyone know if this is possible?

 

[CCOVICH]

Re: intrest only mortgages,

Is this an investment query? Interest only mortgages are generally only recommended for investment properties.

'Interest only' means that you only pay interest, i.e. the capital value of the mortgage does not decrease, but of course the total interest paid over the life of the mortgage will be higher as a result, but monthly repayments will be lower initially. The expectation is that the rental will cover the mortgage repayments and generate a profit, and that the capital value of the property will cover the mortgage outstanding when it is sold.

Not generally recommended for owner occupiers. What is the significance of "we have paid 15% of our mortgage"-is this capital repaid, or 15% of the total amount outstanding? Do you intend to use the equity in your home to raise an investment mortgage?

 

[nelly]

sorry, clarification - we have our "home" and have paid off 15% of this so far. We are now looking at investing in a rental property - dooer-upper and are wondering if we would they type of candidates that interest only mortgages are available for.