RBS Interest Only Mortgages
What is an interest only mortgage?
An interest only mortgage is a mortgage that people use to purchase property, where the monthly repayments only cover the interest of the mortgage.
Interest only mortgages differ to other mortgages, as the entire capital of the mortgage has to be repaid at the end of the end of the term.
When to use an interest only mortgage?
There are multiple uses for an interest only mortgage. The majority of interest only mortgages are used to keep the borrower’s monthly outgoings down.
It is possible to use an interest only mortgage to remortgage a property; this could be useful when a mortgage’s initial deal has expired or to release equity in a property.
Risk of negative equity
Before considering an interest only mortgage, it is important to note that interest only mortgages increase the risk of negative equity. This is because interest only mortgage monthly payments do not reduce the overall balance of the mortgage.
The amount of interest
Interest only mortgages may be appealing because they offer some of the lowest mortgage repayments on the market.
Despite their low monthly payments, interest only mortgages tend to have the highest interest rates on the mortgage market. This means the amount of interest you pay will likely be more than a regular mortgage.
Interest only mortgages with high street lenders
The features of an interest only mortgage will change from lender to lender, as will the criteria to qualify for one. The majority of lenders will consider the following throughout the application process:
Affordability: Throughout the interest only mortgage application process, lenders will often prioritise affordability. It is not uncommon for lenders to require £50,000 per year (for individual income) or £75,000 (for joint income).
Repayment: Lenders will not agree to an interest only mortgage without a repayment vehicle strategy in place. A repayment vehicle strategy is the plan the borrower has to repay the mortgage by the end of the term. An example of a repayment vehicle strategy is a sale of a property.
Loan to value (LTV): It is likely that it is only possible to secure up to 75% loan to value interest only mortgages through high street lenders. Higher LTV interest only mortgages can be sourced through professional brokers.
RBS Interest only mortgages
RBS offer an interest only mortgage with competitive rates of interest. If you want to see the latest RBS interest only mortgage rates, then use our RBS 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.