Finding The Best Interest Only Mortgage Deal For Your Circumstances
An interest only mortgage allows you to pay only the mortgage interest charges each month and none of the capital, providing a low cost option for those looking to purchase or remortgage a property. Our specialist interest only advisors can help you evaluate the options and figure out if interest only is the right way forwards for you. At the end of the term, the full loan amount will still need to be repaid, so understanding these full financial implications is critical – and something our friendly advisors can help with. Whatever your credit history, whatever size deposit you have, we’re here to help keep you informed and fully explore all the options.
What is an interest only mortgage?
An interest only mortgage is when you only pay the interest charges on your loan each month, not any of the original money. As a result, your payments are lower than they would be on a standard repayment mortgage. However, at the end of the mortgage term, you’ll still owe the whole sum of money borrowed and will need to fully repay it. The money from this can come from a range of sources, including savings, investments, getting a new mortgage, and selling your house.
If you think an interest only mortgage might be right for you and want to get your head around all the implications, talk to our friendly team today! We’ll be more than happy to provide guidance on all aspects of the mortgage process.
Why do people choose an interest only mortgage?
An interest only mortgage definitely isn’t for everyone, but there are certain advantages. Firstly, your mortgage payments each month will be lower, putting less of a strain on your finances and leaving you with more disposable income. It can therefore help those who cannot afford a standard repayment mortgage to get on the property ladder, providing easier access to the market. Most deals don’t stop you from making equity payments, but these can be done on your schedule. Finally, lower mortgage repayments can allow you to focus your attention on other investments, which may help pay for the mortgage at the end of the term.
Maximise your chance of approval with specialist advice from an expert in Interest Only Mortgages
How much will I be able to borrow on an interest only mortgage?
The amount you can borrow on an interest only mortgage is worked out in a similar way to a standard repayment mortgage using income multiples. In the UK, the average income multiple used by lender’s is 4.5x, but some lenders will use higher ones. On an interest only basis, most lenders will stipulate a maximum loan to value ratio of 75%. This means you’ll have to put down a 25% deposit, which may impact the value of property you can purchase. You can borrow more than 75%, but the additional amount will be borrowed on a capital repayment basis, rather than interest only.
Will I need a repayment plan when I apply for an interest only mortgage?
At the end of your mortgage term, the entirety of original amount borrowed will need to be repaid. Consequently, it’s vital you have a repayment plan for the end of your mortgage. There are various options to consider, and the right decision for you will depend upon a range of different factors. Common repayment plans include:
- Lump sum from pensions.
- Investment returns.
- Remortgaging.
- Selling property (hopefully at a profit!)
- Savings.
Interest only mortgages FAQs.
Interest Only Mortgage Calculator
Professional interest only mortgage guidance.
If you’re interested in interest only mortgages, our trusted team of mortgage advisors are here to explain all the ins and outs. We’ve helped many clients navigate the strict interest only eligibility criteria, and fully assess the implications of this type of mortgage before making any moves. Whatever your future plans, we’re here to make them happen, and make sure you are matched up with a mortgage loan that works for you.
Keeping things affordable.
You might be scared interest only is too good to be true, and of course, repaying the loan in full at the end of the term can fill many applicants with apprehension. When the Bank Says No is here to help you understand the implications an interest only mortgage will have on your future, as well as its potential benefits. We’ll get to know your credit history and personal circumstances and help you figure out what kind of mortgage suits you best. Reassuring, guiding, supporting, and advising – our friendly team are here to help you find the best way forwards.