Halifax Interest Only Mortgage
What is an interest only mortgage
Interest only mortgages are mortgages where the monthly payments only cover the interest on the mortgage, which leaves the capital of the mortgage to be repaid at the end of the mortgage term.
When to use an interest only mortgage?
Often interest only mortgages are utilised to drastically reduce the borrower’s monthly outgoings.
In addition, interest only mortgages may be taken out to remortgage a property. This could help release equity in a property to raise capital. Alternatively, an interest only mortgage could be used to secure a better deal after your initial mortgage deal has expired.
Risk of negative equity
It is possible to fall into negative equity when the value of the property drops below the remaining amount on a mortgage.
Bear in mind that interest only mortgages expose borrowers to a great risk of falling into negative equity. This is because their monthly payments do not reduce the overall balance of the mortgage.
The amount of interest
Typically, the interest-only mortgage monthly payments are lower than the majority of other mortgages. However, it should be noted that the amount of interest charged on an interest only mortgage is often the highest on the mortgage market.
Interest only mortgages with high street lenders
High street lenders’ criteria for interest only mortgages are different from lender to lender. However, it is likely that they will consider one or all of the following:
Affordability: Lenders will want to ensure that the interest-only mortgage is affordable, to minimise the risk of borrowers falling into arrears. Lenders will usually have a minimum income requirement of £50,000 per year (for individuals) or £75,000 (for joint income).
Repayment: It is impossible to secure an interest only mortgage without a repayment vehicle strategy in place. The need for a repayment vehicle strategy is to ensure that the entire interest only mortgage is repaid at the end of the agreed term. An example of a repayment vehicle strategy is a sale of a property.
Loan to value (LTV): The majority of lenders will only lend up to a certain percentage. Unless you approach a specialist lender through a professional broker, you will only be able to access up to 75% loan to value.
Halifax Interest only mortgages
Halifax offers an interest only mortgage with competitive rates of interest. If you want to see the latest Halifax interest only mortgage rates, then use our Halifax interest only mortgage calculator above. Simply put in your details and borrowing needs to see the best interest only mortgage deals for you.
If you are not sure whether an interest only mortgage is right for you, then speak to our independent mortgage broker team who will be able to offer impartial advice.