NatWest Interest Only Mortgages
What is an interest only mortgage?
Interest only mortgages are mortgages where your monthly payments only cover the interest of the mortgage. Unlike repayment mortgages, where you have to pay both the capital and the interest each month, the capital of the interest only mortgage has to be repaid at the end of the mortgage term.
When to use an interest only mortgage?
Interest only mortgages can be used in many different set of circumstances. However, they are often used to keep borrowers’ monthly outgoings as low as possible; this could be useful when their initial mortgage deal has come to an end or to when they want to release equity in their property to fund a project.
Risk of negative equity
Conversely, interest only mortgages expose borrowers to a higher risk of falling into negative equity. This is because monthly payments only cover the interest and do not reduce the mortgage balance throughout the mortgage term.
The amount of interest
Interest only mortgage monthly payments are often some of the lowest in the market, as they are only for the interest of the capital.
Despite the size of the monthly mortgage payments, it should be noted that the amount of interest paid over the entire mortgage term will be higher than other mortgages.
Interest only mortgages with high street lenders
The features of an interest only mortgage and the requirements to qualify for one will depend on the lender. Typically, lenders will consider the following:
Affordability: Lenders will consider the affordability of the interest only mortgage to ensure the borrower can keep up with the payments. Lenders often will require a joint income of £75,000 per year or an independent income of £50,000.
Repayment: Before granting any interest only mortgages, lenders will require sight of a detailed repayment vehicle strategy to ensure the repayment of the entire mortgage at the end of the term. A repayment strategy is the method that the borrower will use to repay the mortgage; this could be the sale of a property.
Loan to value (LTV): The majority of lenders will only provide interest only mortgages up to 75% of the value of the property. It is possible to secure higher LTV interest only mortgages through professional brokers.
NatWest Interest only mortgages
NatWest offer an interest only mortgage with competitive rates of interest. If you want to see the latest NatWest interest only mortgage rates, then use our NatWest 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.