interest only mortgage,how do they work?

[pinkcowprint]

my dads retired,mum in a few years,they want to move and will need a mortgage of 40-50 grand.i have heard about these mortgages,is it possible for them to just pay interest until they pass away and then use the house to pay if anything else is left on it?they could be here another 20 years so was a bit unsure how it works exactly.they would rather pay little,enjoy their money and use the house to pay it off when they go.thanks

[Hymie]

In simple terms, the difference between an interest only mortgage and a repayment mortgage is that at the end of the mortgage term; with a repayment mortgage the original mortgage (or loan amount) is paid off – whereas with an interest only mortgage, the original amount (loan) is still outstanding.

Interest only mortgages are normally only offered if you can show that you have some separate investment plan that will pay off the mortgage (loan) amount at the end of the mortgage term.

Current, monthly payments on an interest only mortgage of £50k would be around £160.

Your parents will be paying the mortgage after they retire – the mortgage company will want to ensure that they have the necessary income to repay the monthly cost (which could increase).

Mortgage companies don’t like offering interest only mortgages, where at the end of the mortgage, the house will be sold to pay off the original loan amount. There will inevitably be some delay between the mortgage ending and the house being sold – during which time interest on the loan (mortgage) will still be payable.

I would recommend you get professional advice from a number of mortgage advisers to check out the options open to your parents.

[latour]

If your parents are say now 40 and still have 25 years left of an interest mortage then who cares, In 25 years time £300,000 will be sod all (equivalent to about an equivalent average years salary). As long as they save now and again along the way - no probelms.