As its name suggests, an interest only mortgage means you only repay the interest payable on your loan, not the actual loan itself.
While this may seem just the same as spending “dead money” on renting a property, the difference with an interest only facility is that the monthly cost is often much more reasonable than renting. Plus, you can secure the property where you want to live, make the interest only payments initially, and then choose to clear some of the loan’s capital later if your financial position alters.
In addition, the property which you own could rise in value, giving you a profit when you come to sell it. The flexibility of interest only mortgage products mean that they are also a popular choice for landlords who rent out multiple properties who would prefer not to sink too much investment into capital repayments. If they can secure a monthly rent from the tenants that is greater than the interest only payments, then the investment may be self financing.
The risk factor to bear in mind with interest only is that the value of the property is not guaranteed to increase, but could fall instead. If this happens, the owner may have difficulty repaying the full balance of the loan. Lenders usually require you to have a higher percentage of equity in the property before they accept an interest only application. With every lender having different interest only criteria it is worthwhile to check with us for the availability of such deals.
Switching to an Interest Only Mortgage
We can help you find the right interest-only deal through our extensive expertise and understanding of the current economic climate and lenders criteria. If you’re considering switching your mortgage, then contact us for completely objective interest only advice and let us help find the most suitable product available for you.
