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Home » What’s better interest-only or repayment?

What’s better interest-only or repayment?

Are you wondering whether an interest-only or repayment mortgage is better for you? Let’s break down the differences to help you make an informed decision.

An interest-only mortgage offers lower monthly payments since you’re only paying the interest on the loan, not the principal. This can be beneficial if you need to keep your monthly expenses low. However, it’s essential to note that with an interest-only mortgage, you must pay off the loan in full at the end of the loan term. This means you’ll need to have a plan in place to cover the entire loan amount when the time comes. Additionally, interest-only mortgages tend to cost more overall due to the extended period of time without paying down the principal.

On the other hand, repayment mortgages may come with higher monthly payments because you’re paying both the interest and the principal. However, these payments allow you to pay off your mortgage in full by the end of the loan term. Unlike interest-only mortgages, repayment mortgages generally cost less throughout the loan since you’re actively reducing the amount owed over time.

So, which is better? It ultimately depends on your financial situation and long-term goals. If you prioritize lower monthly payments and have a solid plan to pay off the full loan amount at the end of the term, an interest-only mortgage might work for you. On the other hand, if you prefer the peace of mind of steadily reducing your debt and potentially paying less overall, a repayment mortgage could be the better option.

(Response: The choice between an interest-only and repayment mortgage depends on individual financial circumstances and goals. Consider whether lower initial payments or reducing overall costs is more important to you.)