Deferred Interest Mortgage
A deferred interest mortgage is interest that is not paid during the deferral period. When the monthly paymentsdo not cover all of the interest cost, the unpaid interest is deffered by adding to the original loan balance.
Some lenders add this interest to the total of your loan to give a new loan figure and new interest payments. Others calculate your interest payments on the original loan as normal and then spread the repayment of the deferred interest over a set period of time.
The latter method is better for you, as adding the deferred interest to the
loan means you end up paying interest on the deferred interest!
Click for more mortgage glossary terms relating to remortgaging.