Santander Interest Only Mortgage
What is an interest only mortgage?
An interest only mortgage is a mortgage where the borrower only pays the interest generated on the capital borrowed. Unlike other mortgages, where you have to repay both the capital and the interest at the same time, the capital of an interest only mortgage has to be repaid in full at the end of the mortgage term.
When to use an interest only mortgage?
An interest only mortgage could be appropriate for a number of differed scenarios. Typically, interest only mortgages are utilised where the borrower wants to keep their monthly outgoings as low as they can.
An interest only mortgage could be a good option when a mortgage’s initial deal has expired. Alternatively, an interest only mortgage could be used to remortgage a property to release equity.
Risk of negative equity
It should be noted that interest only mortgages do increase the risk of negative equity, as the monthly payments made do not reduce the overall balance of the mortgage.
The amount of interest
The monthly mortgage payments are some of the smallest on the mortgage market, as they only cover the interest of the capital.
Although the payments are smaller, the amount of interest charged over the entire term of the mortgage is often more than a regular mortgage.
Interest only mortgages with high street lenders
It is not uncommon for the requirements to qualify for an interest only mortgage to vary depending on the lender. However, lenders will often review the following:
Affordability: Lenders will often prioritise affordability for an interest only mortgage. The majority of lenders will want an individual income of £50,000 or a joint income of £75,000 to ensure repayments are serviced.
Repayment: All lenders will need to see a detailed repayment vehicle strategy in place before providing an interest only mortgage. A repayment vehicle strategy is the method that the borrower intends to use to repay the interest only mortgage. An example of a repayment vehicle strategy is a sale of a property.
Loan to value (LTV): Lenders will only agree an interest only mortgage up to a certain percentage (usually up to 75%). Higher LTV interest only mortgages are available through intermediaries and professional brokers.
Santander Interest only mortgage
Santander offer an interest only mortgage with competitive rates of interest. If you want to see the latest Santander interest only mortgage rates, then use our Santander 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.