Interest Only Mortgages Explained
Given the current difficulties in getting on the property ladder, due to high property prices, pay freezes etc, interest only mortgages have become increasingly popular as a means of getting off the renter's market and into property ownership.
As its name suggests, an interest only mortgage means you only repay the interest rate attached to your mortgage, 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 mortgage is that the rate is often much more reasonable than renting. Plus, you can secure the property where you want to live, make the interest only mortgage payments initially, then choose to clear some of the loan's capital later on if your financial position permits it.
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 rates 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 rate of monthly rent from the tenants that is greater than the interest only mortgage rates, then the investment will pay for itself.
The risk factor to bear in mind with a mortgage that has interest only repayments 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 may require you to have a small percentage equity in the property (10%) before they agree to an interest only mortgage.
Switching to interest only mortgage
We can help you find the right interest only mortgages in the UK through our extensive expertise and understanding of the current economic climate. If you're considering switching your mortgage, then contact us for completely objective interest only mortgage advice and let us help find the most suitable product available for you. Buy to let mortgages are not regulated by the Financial Services Authority.
I can honestly say all the staff I have been in touch with throughout the mortgage selection and application process have been excellent. Right from Darren who I initially spoke to on the phone back in April, to Mary and Clare who Darren passed over to while he was away, and Karen and Yvette who have answered all my questions promptly in the latter stages of the application process. All of the above have always replied to my correspondence in a very timely manner regardless of when I have emailed or called and the advice I have received has at all times been impartial and easy to understand. As a direct result of the people I have dealt with I would happily use TMBL again myself and equally would recommend them to family and friends in a similar situation. A big thanks to all of you for making what could have potentially been a time consuming nightmare of a process into something I hardly had to give a second thought.
Mr Lennox
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