Interest-only mortgages - are they a good option for me?

We work with Private Finance - an independent mortgage broker - who work on your behalf to procure competitive terms and a suitable solution, quickly and efficiently. We asked them to tell us about interest-only mortgages and give us the inside track on when to choose an interest-only mortgage in order to save money and gain greater flexibility...


Who’s eligible for interest-only mortgages?

Typically, the borrower should have a low LTV and a strong income to be eligible for an interest-only mortgage with most lenders, however there are some lenders who have no minimum income requirement and are more lenient on LTV and minimum equity. The key factor is to ensure that either the borrower has enough equity in their main residence to make it fit or an alternative repayment vehicle in place.

What is the marketplace like for such mortgages?

The eligibility criteria is stricter than it used to be and is more restrictive than a repayment mortgage, however interest-only mortgages are still around. Lenders tend to like to offset the interest-only risk by targeting stronger customers in general. We have a vast number of specialist lender connections we use to help many of our clients get interest only mortgages if it is a priority for them.

Are they good option in the current economic climate?

It would depend on the individual’s circumstances. Borrowers are attracted to the concept of minimising their mortgage payments, making the mortgage more affordable and then can use their disposable income elsewhere. This can be useful in times of cash flow issues and expenditure cutbacks. This could be beneficial for those with high incomes and an income structure where they can make extra payments against the loan principle for example with bonus or commission and thus reduce the amount of the monthly payment. This is a riskier option than a repayment mortgage, but a risk many are happy to take on to have better cash flow.

Read a case study about clients running their own business who were looking to insulate themselves against potential interest rate rises

If you'd like information on how we can help you to secure the mortgage you require, please contact our branches:

Alderley Edge

01625 540340

0161 928 8881