Moving to an Interest Only Mortgage
Best Mortgage Rates
Moving to an Interest Only Mortgage
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- Lloyds Bank
- 4.07% Initial
- 5 year fixed
- 6.6% APRC
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Cashback Max £250Free LegalsFree Valuation
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- 4.10% Initial
- 5 year fixed
- 6% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.14% Initial
- 5 year fixed
- 6.3% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.17% Initial
- 5 year fixed
- 6.4% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.17% Initial
- 2 year fixed
- 6.7% APRC
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Cashback £0Free LegalsFree Valuation
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- Halifax
- 4.18% Initial
- 5 year fixed
- 6.7% APRC
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Cashback Max £250Free LegalsFree Valuation
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- Halifax
- 4.18% Initial
- 5 year fixed
- 6.7% APRC
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Cashback Max £250Free LegalsFree Valuation
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- 4.19% Initial
- 5 year fixed
- 6% APRC
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Cashback Max £1,250Free LegalsFree Valuation
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- 4.19% Initial
- 2 year fixed
- 8% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.20% Initial
- 5 year fixed
- 6% APRC
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Cashback £0Free LegalsFree Valuation
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Moving to an Interest Only Mortgage
Find the best interest-only mortgage deal for you
When you want lower monthly mortgage repayments and are prepared to take on the responsibility of repaying the mortgage in full at the end of the mortgage term, an interest only mortgage might be a good option for you.
Benefits of interest-only mortgages
Most home buyers are familiar with repayment mortgages, which are mortgages in which each monthly repayment includes both interest and capital.
Once the mortgage term is over, this type of mortgage will have been repaid in full. Some mortgage holders, however, prefer the benefit of lower monthly repayments with an interest-only mortgage. The interest only mortgage means that you only have to repay the interest each month, rather than any of the capital.
The downsides of interest-only mortgages
Interest-only mortgages can be attractive to some homeowners, but they may not be right for everyone. To repay your mortgage capital at the end of the term, you need a clear, well-planned repayment vehicle.
Savings or investment plans are often used by interest only mortgage borrowers to repay their loans at the end of the term. Interest-only mortgages can be repaid in a variety of ways, including:
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Individual savings accounts
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Investing in unit trusts
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Bonds for investment
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The pension system
Other properties or assets that can be sold to pay off the mortgage include shares.
Whether you can move to an interest-only mortgage will also depend on the size of your mortgage. Mortgages with interest only are usually only available where the equity or loan to value (LTV) is less than 75%. Additionally, some mortgage lenders are only offering interest-only mortgages at 50% equity since stricter lending criteria were implemented last year.
Planning ahead
You should regularly review your mortgage repayment plan if you take out an interest only mortgage. To help you pay off your mortgage, some mortgage lenders allow you to switch back to a repayment mortgage or a part-repayment, part-interest mortgage. Additionally, you could reduce the mortgage capital by moving or adding to your investment plan.
Mortgage relocation
You need to find lenders who offer interest only mortgages if you want to remortgage from a repayment mortgage to an interest only mortgage. The right interest-only mortgage deal may not be available from all mortgage lenders, and repayment mortgages are definitely easier to find at the moment, so you may need to look around.
To investigate your finance options call our broker team or fill in our call back form - speak to our independent mortgage broker team who will be able to offer impartial advice or you can call us on 0117 403 3464