With an interest only mortgage you will only make payments towards the interest on the amount you've borrowed. This means that you will still owe the full amount borrowed against your property at the end of your mortgage term. You will need to clearly demonstrate how you will repay this amount which can include, an investment portfolio, a pension or the sale of other properties.
If you have concerns about repaying the mortgage balance at the end of the term then considering a repayment mortgage may be more suitable. With a repayment mortgage the payments are higher but providing you make all the payments then the mortgage will be repaid at the end of the term. In addition to the lower risk, a repayment mortgage will also be cheaper over the long term as your total interest payments will be lower as the mortgage decreases.
Interest only mortgages are targeted at newly qualified professionals, people with property portfolios, high earners, people who receive annual bonuses or additional income. Combining an Interest only mortgage with an offset facility can also work well.
The main attraction of an interest only mortgage is lower monthly payments which gives a degree of flexibility. Property developers for example work off the assumption that their property portfolio will increase over time, by keeping their payments low they have the flexibility to maximise their investment with an alternative repayment plan, understanding that they will repay the mortgages from amassing their rental incomes along with the equity increases in their property portfolio.
The appeal of an interest only mortgage will depend on your circumstances, future plans and your attitude to risk. Falbros’ experienced mortgage consultants are well placed to determine whether or not such a scheme is suitable for your needs.
We have a range of calculators to help make things simpler for you, from calculating payments to understanding how much your stamp duty may be. These calculators are for guidance purposes only.
Our mortgage brokers offer mortgage advice on a wide variety of mortgages, more detailed information about the different mortgages can be found below.