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5. Capital Deferment mortgage

A capital deferment mortgage enables the homebuyer to minimize their monthly repayments by initial paying only the interest portion of the loan and structuring the introduction of capital repayment amounts in equal yearly increments over a set period of time (five years).
Capital deferment mortgages defer a certain percentage of the principle that would normally be paid over the first five years of the Loan. This percentage declines from a 100% deferment in year one tvo 20% in year five.
Capital Deferment mortgages are perfectly suited to young professionals and new business owners who can reasonably expect their income to increase substantially over time.

Important Factors

• The client will still pay interest on the outstanding balance during the deferment period.
• The deferred capital payments are structured into the remaining period of the loan. This means that monthly re-payments in the later stages of the loan will be higher than the minimum monthly payments of a normal 'Capital and Repayment' mortgage.
• Maximum loan to value ration of 90%

Tips for the client

• Plan ahead to ensure that you can afford the higher instalments in the later stages of the loan.
• Paying lump sums into the loan account whenever possible will offset the higher future payments.

Read about an equity release linked mortgage

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