Interest Only Mortgages
Our Interest Only Mortgage Service - helping you make the right decision
Special features of what we offer include:
- Whole of market service - we work with most UK lenders that operate on an interest only basis
- Access to leading market mortgage rates
- Access to exclusive loan deals not available on high street
- Fast turnaround - speak to us today if you need to move quickly
- We have lenders who will take into account previous defaults and missed payments
- Looking to raise additional finance on top of your existing mortgage or buy to let mortgage? - we have access to a range of finance solutions
To investigate your mortgage options call our mortgage team on 0117 313 7780 or fill in our call back form.
As the name suggests, an interest-only mortgage works on the basis that you only pay the interest due on the amount you borrowed each month.
Each month, you’ll pay out less than you would on an equivalent value repayment mortgage, because you are only repaying the interest, not the capital itself.
You will still owe the amount you originally borrowed at the end of the mortgage term, so you will need to have a repayment plan in place to pay back the full cost of the property at the end of the mortgage term
By investing the money that you save on capital repayments each month into ‘repayment vehicle’, such as an ISA, a pension or other investments, you build up a lump sum over the term of the mortgage which you then use to pay off the entire mortgage balance.
There is a potential for risk with an interest only mortgage that isn’t present if you take out a repayment mortgage - if you do not have sufficient funds available to repay the capital in full at the end of the term, you may have to sell your property.
Potential advantages of interest only mortgages
There are several reasons why you might consider an interest only mortgage, some of which include:
Lower repayments - The prospect of lower monthly payments can be an appealing option and could make a mortgage more affordable in the short term. Use a mortgage calculator to work out your monthly payments.
Potential extra cash - If your repayment vehicle does really well over the term of the mortgage, you could find that you can afford to pay off the capital with some extra cash left over.
Flexibility - Interest only mortgages can sometimes offer greater flexibility that repayment mortgages – for example, you may be able to make overpayments one month and just pay interest the next month depending on your cash flow.
Potential disadvantages of interest only mortgages
While the monthly repayments you make on an interest-only mortgage are likely to be lower than with a repayment mortgage, there are some potential disadvantages to be aware of:
Lack of security - This is one of the main potential drawbacks of an interest only mortgage. There is no guarantee that your repayment vehicle will perform well enough to ensure that you can pay off the mortgage in full at the end of the term.
Limited Lenders – Not all UK lenders offer interest only options. Lenders that do will do so on set criteria, and there are only a small number of lenders that accept selling the property as a valid reason for repayment.
Existing mortgage on property - Typically interest only lenders will require you to have no more than a 75% LTV on your property.
New Mortgage? If yes you will typically need a large deposit – You might save on your monthly repayments with an interest only mortgage, but you may find it hard to access one unless you can provide a substantial initial deposit. Most lenders who provide an interest only option will require you to have at least a 25% deposit.