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Property (Deferred interest mortgage (Where the interest has been accrued,…
Property
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Interest only mortgage
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During this period, no capital repayment is made
At the conclusion of the period, the mortgagee is responsible for either re-financing the terms of the loan or paying off the entire mortgage completely
This type of loan is appropriate for those individuals with variable income or someone who knows they will receive a considerable amount of money by the time the mortgage is due to be repaid
Pension mortgage
An interest only mortgage, however with the establishment of a separate plan in the form of a personal pension which will benefit from tax relief and tax free profits within the plan
When the pension is paid the retiree is entitled to a 25% tax free lump sum which is used to pay off the outstanding mortgage
The mortgage debt will not reduce for the duration of the loan and there is no guarantee that the lump sum payment will be sufficient to discharge the mortgage liability
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Repayment mortgage
A fixed rate mortgage is one where the monthly payment is guaranteed to remain the same throughout the duration of the loan period
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In the early years, most of the payments will go towards paying the interest, in the later years, the principal amount will be cleared
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Other property investments such as buy to let have been popular in recent years. As long as the rental income covers all outgoings and an amount can be put aside for repairs and modernisation, a buy to let, may over time turn out to be a good investment
It is also possible to invest indirectly in property by using property funds including closed ended funds such as REITS
A long term investment in property offers security as value and income tend to keep up with inflation. However there are periods when both commercial and residential property fall in value and therefore become difficult to sell if required
It can also provide difficult to withdraw an investment made in an open ended fund of property if the manager is unable to find buyers for the property investments held by the fund because of market conditions and the fund has insufficient cash to repay investors