Many United Kingdom property owners are discovering the tremendous advantage of interest only mortgages. These notes once referred to as balloon mortgages are quickly becoming the financial instrument of choice for UK investors wanting to diminish their tax liability. Basically an interest only mortgage requires that only the per annum interest on the amount owed is paid in monthly installments. The total amount of principal owed remains constant over the course of the loan. There are two distinct advantages to such a mortgage. First the payments are extremely low. Second all of the interest paid is deductible from income tax. When one is using a property as an income producing investment this is perect so as to keep costs down and pocketable revenues available.
Now it must be remembered that with this type of loan there will come a day when the entire balance becomes due. At such time one must either have the cash put by to pay off the loan or remortgage the lot. The positive assumption is that the property will so rise in value as to make a refinance arrangement easy to attain. Another hopeful plus is that should one decide to sell the property, the capital gains tax will be a lesser cost than the cost paid though the years in equity share or principal if you prefer.
