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Can I Get an Interest Only Mortgage

Best Interest Only Mortgage Rates

I Want To Buy I Want to Remortgage

Can I Get an Interest Only Mortgage

    • 4.08% Initial
    • 5 year fixed
    • 6.6% APRC
    • Cashback £0
      Free Legals
      Free Valuation
    • Get quotes
    • 4.08% Initial
    • 5 year fixed
    • 6.7% APRC
    • Cashback £0
      Free Legals
      Free Valuation
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    • 4.13% Initial
    • 5 year fixed
    • 6.7% APRC
    • Cashback £0
      Free Legals
      Free Valuation
    • Get quotes
    • 4.18% Initial
    • 5 year fixed
    • 7% APRC
    • Cashback Max £250
      Free Legals
      Free Valuation
    • Get quotes
    • 4.18% Initial
    • 5 year fixed
    • 7% APRC
    • Cashback Max £250
      Free Legals
      Free Valuation
    • Get quotes
    • 4.23% Initial
    • 3 year fixed
    • 7.5% APRC
    • Cashback Max £250
      Free Legals
      Free Valuation
    • Get quotes
    • 4.23% Initial
    • 3 year fixed
    • 7.5% APRC
    • Cashback Max £250
      Free Legals
      Free Valuation
    • Get quotes
    • 4.27% Initial
    • 5 year fixed
    • 6.7% APRC
    • Cashback £0
      Free Legals
      Free Valuation
    • Get quotes
    • 4.27% Initial
    • 5 year fixed
    • 6.7% APRC
    • Cashback Max £250
      Free Legals
      Free Valuation
    • Get quotes
    • 4.28% Initial
    • 5 year fixed
    • 6.7% APRC
    • Cashback £0
      Free Legals
      Free Valuation
    • Get quotes

Representative example based on a fixed rate mortgage

A mortgage of £375,000 payable over 20 years initially on a fixed rate for 5 years at 4.38% and then at the standard variable rate of 7.65% for the remaining 15 years would require 60 monthly payments of £2,351.88 and then 180 monthly payments of £2,899.55.

The total amount payable would be £663,156.80 which includes interest and product fees of £1,124.

The overall cost for comparison is 6.5% APRC representative.

Early repayment charges may apply.

Can I get an interest only mortgage?

Two years ago, the answer to this question would probably have been that it would be difficult. Following the financial crisis, lenders effectively closed their doors and stopped lending, especially to products that offered low interest rates, no fees, and high loan-to-value ratios. More and more lenders are now offering them again.

Interest-only mortgages: what are they?

With an interest only mortgage, you borrow the money you need to buy the property and then instead of making large capital repayments and interest payments each month, you only have to pay interest. The mortgage never reduces the capital, you only pay interest. Upon reaching the end of the term, you will still owe the capital, so you will need a repayment plan.

If you borrowed £150,000 over 25 years at 5% interest, the difference in repayment and interest loans would be £150,000. Monthly interest-only payments would be £625 and repayment and interest would be £877. There would be a difference of £252 per month, but if interest and capital payments were made, the loan would be repaid at the end of the term.

Long-term, how does an interest only mortgage work?

There is a risk involved. In the past, people relied on an increase in property values to repay the capital. If another financial crisis occurs and the borrower has overstretched themselves, you may need to make other arrangements. Endowment policies were often taken out alongside mortgages. At the end of the mortgage term, they matured and paid off the capital. Due to their failure to clear the debt, these became less popular.

Lenders are now willing to lend 75% of the property's value so long as the proceeds of the sale will be used to repay the outstanding loan.

Will this work for me?

Everyone's circumstances are different, and yours may change as well. You could take an interest-only loan for the short term and then switch to repaying the capital later with many lenders if you feel you will struggle to make repayments and interest. In some cases, lenders will allow you to pay back some of the capital, so even if you don't fully clear the mortgage, you will have cleared some capital. Use our mortgage calculator to see what interest only deals are available.

What are the criteria for an interest only mortgage?

Interest-only mortgages are available, but under tough new rules introduced by the FCA's Mortgage Market Review, these are only available if there is a clear plan for repaying the capital at the end of the term.

Take out a mortgage today and you'll be asked about your spending, income, and affordability. As a result of adding this to the mortgage application process, you will be able to benefit more than ever from professional advice. By talking to us, you could really save yourself money, time, and stress, in addition to the huge range of products available.

 According to the Financial Conduct Authority's Mortgage Market Review, lenders can only provide interest-only mortgages if they have a credible plan for repaying the capital.

A rise in interest rates will force borrowers to assess their affordability and if they can cope with the increased costs. 

Independent Advice

If you are not sure whether an interest only mortgage is right for you speak to our independent mortgage broker team who will be able to offer impartial advice or you can call us on 0117 403 3464

Still Haven't Found What You Are Looking For? Interest Only Mortgage Quotes
Still Haven't Found What You Are Looking For? Interest Only Mortgage Quotes