Why get an Interest-Only mortgage?
The main advantage of interest-only mortgages is lower monthly payments since you are only paying the interest due on the amount borrowed. And if you are concerned about having to pay the entire capital at the end of the mortgage term, you may be able to switch to a repayment mortgage later
Interest-Only Buy-to-Let Mortgages
The interest-only mortgages are often found in the Buy-to-Let market. With lower monthly mortgage payments some prefer to use the money they would have otherwise used to repay the mortgage to invest elsewhere instead. Find out more about this type of mortgages and how we can help on our Buy-to-Let page.
Interest-Only Residential Mortgages
An interest-only residential mortgage may be useful for you if:
- You are planning to downsize at the end of the mortgage term, when you have to repay the entire mortgage loan
- You want to remortgage on an interest-only basis because you want to reduce your monthly payments and you have a suitable repayment vehicle in place
- You have an alternative repayment strategy such as investments or equity in other properties that you can sell
It is also possible to split a mortgage into interest-only and repayment with the so-called Part-and-Part mortgages. This means that you will repay part of the mortgage balance as repayment and the other part as interest-only. This way you have the benefit of lower monthly payments while still reducing your debt at the end of the term.
However, bear in mind that since you will have a significant debt to repay at the end of the term, the lending criteria is still strict and lenders will ask to see evidence of a repayment strategy for the interest-only portion of your mortgage.
THINK CAREFULLY ABOUT SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBTS SECURED ON IT.
BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.