Information on amortization-free loans
Certainly it sounds like an exciting idea with a loan that you do not need to repay at all. And it is actually that there are loans that are there, in whole or in part. But of course you should remember that this is during the term and that the loan will actually be repaid at some point.
How does it work?
It’s actually quite simple really, you take out a loan from a lender that offers amortization-free loans. During the time that you have subsequently agreed that you should not repay, you only pay interest on the loan. Thus, you do not make any repayments on the loan itself at all during the time that you have the amortization freedom.
Depending on what you have agreed with the lender on, you should after the time you have decided that you should not pay off the mortgage start paying off the loan. It may then be that the lender expects to receive the entire sum at once or you should start repaying as usual. For example, it is quite common for lenders to offer their customers an amortization-free first year and then start repaying.
It is also common for a lender to give you a mortgage loan the option of not repaying this. They can do this when the mortgage is slow on a mortgage, so it doesn’t make a big difference whether a little is repaid every month or not.
A senior loan is a very good example of a type of mortgage where you do not need to repay at all. This is a loan for older people who have a home that can be mortgaged. The lender often mortgages up to 60% and this is not necessary to repay before the house is sold or the loan period ends.
Why should I take out an amortization-free loan?
There are both advantages and disadvantages to an amortization-free loan that is something you should have ready for you. The big advantage is that during a period you will not have such high monthly costs as only the interest needs to be paid on the loan. This can be suitable, for example, if you have just bought a new house that needs to be bought interior for a renovated. During a period you can then get a little more money to move with.
The big disadvantage of an amortization-free loan is that you constantly pay interest on the entire amount. The bottom line is that the loan becomes more expensive overall, which is also one of the reasons lenders may want to lend money in this way.
Therefore, consider carefully when a lender asks how you want to do with the amortization as it can be quite a bit of money in the slightly lower term. Our basic tip is that it is better to amortize than not to do this even if it is only with a small sum. This will be cheaper in the long run and should you ever need to change the repayment rate on your mortgage, for example, you can contact your lender and check out that opportunity.