The Mudcat Café TM
Thread #114535   Message #2444999
Posted By: Rasener
19-Sep-08 - 10:03 AM
Thread Name: BS: 125%Mortgage/negative equity difference?
Subject: RE: BS: 125%Mortgage/negative equity difference?
And lets not forget the good old Interest Only Mortgage where you have life insurance, just in case you pop your clogs before the mortagage is paid off. You then pay into an equity shares scheme that will hopefully grow over the years to equate to the original Loan (Capital) Value of the house. So you pay an amount for the life insurance equity shares scheme and only the interest on the mortgage.
The big problem being that if the share scheme falls short of the capital value and at the ripe old age of 65, you are left with a great big bill because you can't pay off all the capital amount.
Imagine doing that with a 125% mortgage.

Here is an explanation of the interest only mortgage.
Interest Only Mortgage