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Interest only mortgages and leaseback properties

 
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unknown



Joined: 17 Jan 2020
Posts: 14

PostPosted: Tue Jan 17, 2020 11:34 am    Post subject: Interest only mortgages and leaseback properties Reply with quote

I have been offered an interest only mortgage to buy a leaseback property in France. The sellers tell me that this will cover my mortgage costs and leave me with a guaranteed rental income. Is this true?
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unknown



Joined: 17 Jan 2020
Posts: 14

PostPosted: Tue Jan 17, 2020 11:35 am    Post subject: Reply with quote

My immediate reaction is no! I do not know how you propose paying off your mortgage at the end of the term (as this is an interest only mortgage you will still have to pay back the capital). What should happen if the value of the leaseback property decreases rather than appreciates over the years? You should take professional financial advice which will tell you that the mortgage rate could well fluctuate in years to come. This will leave you out of pocket. Please be careful about the term “guaranteed rental income”. Remember that at the expiry of the lease there will no longer be any guaranteed rental income. How will you then service your mortgage repayment? You need separate independent legal advice when entering into a leaseback.
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