HSBC Interest Only Mortgages
What is an interest only mortgage?
Interest only mortgages’ monthly payments only cover the interest of a mortgage. Although the monthly repayments are only the interest of the mortgage, the entire capital must be repaid at the end of the mortgage term.
When to use an interest only mortgage?
Interest only mortgages can be used for a variety of scenarios, but mostly they are used to secure lower monthly outgoings.
Interest only mortgages can be used to remortgage a property. This may be an appealing prospect to release equity or when an existing mortgage’s initial deal has expired.
Risk of negative equity
Negative equity is when the value of the property falls below the remaining amount left on a mortgage.
Interest only mortgages increase the chance of negative equity because their monthly payments do not reduce the overall balance of the mortgage.
The amount of interest
Although the interest-only mortgage payments are small, they often have some of 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
Interest only mortgage criteria and the terms of an interest only mortgage will be determined by the lender. Although there is no set requirements for an interest only mortgage, lenders will usually consider the following:
Affordability: Typically, lenders’ main concern is whether the interest-only mortgage is affordable or not. To ensure that applicants do not fall into arrears, lenders will only grant interest only mortgages to those with income over £50,000 per year (for individuals) or £75,000 (for joint income).
Repayment: A repayment vehicle strategy is the method that the borrower intends to use to repay the loan at the end of the mortgage. An example of a repayment vehicle strategy is a sale of a property. Lenders will refuse any application for an interest only mortgage without a clear repayment vehicle strategy in place.
Loan to value (LTV): Interest only mortgages through high street lenders will usually only be up to 75%. In the event that a higher LTV is required, it is advisable to contact a specialist broker for higher LTV interest only mortgages.
HSBC Interest only mortgages
HSBC offers an interest only mortgage with competitive rates of interest. If you want to see the latest HSBC interest only mortgage rates, then use our HSBC interest only mortgage calculator above. Simply put in your details and borrowing needs to see the best interest only mortgage deals for you.
Independent advice
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.