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How Do I Get An Interest Only Mortgage

Interest Only Mortgage Rates

Our Mortgage Service

Looking for an interest only deal? Special features of what we offer include:

  • Whole of market service - we work with most UK lenders who offer interest only products
  • 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
  • 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 interest only mortgage options call our mortgage team on 0117 313 7780 or fill in our call back form.

"The essence of the Fair Mortgages service is professional independent mortgage and protection advice brought to you by a team of specialist advisers and experienced administration support. 

As your mortgage is such an important transaction, good advice is imperative.

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How Do I Get an Interest Only Mortgage

Interest only mortgages are a type of property finance, available for both residential and buy to let purchases. They differ from repayment mortgage in that rather than the monthly mortgage payments covering the interest which has accumulated on the balance as well as a portion of the original loan, it merely covers the interest; As such, at the end of the mortgage’s full term the borrower is expected to repay the original loan amount in full. 

This means that the monthly payments on interest-only mortgages tend to be cheaper than they would be on a comparable repayment mortgage; however, it is the borrower’s responsibility to raise enough capital over the mortgage’s term to repay the original loan.

Applying for an interest only mortgage

As interest-only mortgage’s are considered to be a higher lending risk than repayment, lenders tend to have more rigorous requirements from potential borrowers in order to secure this type of finance.

  • Repayment plan: During application borrowers may be required to a detailed savings or investment plan to illustrate how they are intending on raising the requisite capital over the course of the mortgage. Stating you intend to repay the original sum through the sale of the property, may not be sufficient for many lenders, as if property prices fall and you fall into negative equity lenders they risk out on getting back less than you originally lent them.
  • Deposit: While it is possible to secure a residential repayment mortgage with a loan to value (LTV) of around 95% for interest only most interest only lenders will need  to place a deposit of at least 25% of the property’s value  
  • Affordability: Lenders also tend to have more stringent affordability requirements for their interest only products. Certain lenders may have a requirement that each applicant earns at least £50,000 a year. Some lenders may also be less willing to allow applicants to include irregular sources of income such as bonuses, lenders may also require applicants to have better credit scores than would be necessary with repayment mortgages; However, some lenders may be less stringent.  

Before taking out an interest only mortgage

As with many financial products it is wise to thoroughly shop around different providers and plans before taking one out to try and the best deal for a product that is suitable for your needs. You may also want to consider alternatives as well such as a repayment mortgage.

Mortgage adviser

Borrowers interest in interest only finance may want to use the services of an independent mortgage adviser, who can offer them impartial advice. One that offers a whole-of-market service can use their professional knowledge of the industry to search across different providers on the behalf of their clients, to try and find them the best deal.

To find out if Fair Mortgages could help you, fill in the online contact for to request a call back. Alternatively you can call directly on: 0117 313 7780

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