Interest Only mortgage

Interest only mortgages are a type of mortgage where only the interest is repaid. The full capital amount remains outstanding during the mortgage term and is repaid in one lump sum at the end of the term,

Lenders require evidence that a customer will have in place a clear credible repayment strategy and that the repayment strategy has the potential to repay the capital borrowed.

Repayment strategies may include deposits or investment product(s), pension(s), periodic repayment of capital from irregular sources of income (i.e. bonuses), the sale of another property or other land or other acceptable methods which meet lending criteria.

This means that the mortgage payments each month will be lower than those of a repayment mortgage for a similar loan and term. Where the repayment of capital is an investment the investment runs alongside the mortgage but is separate from it; the cost should be taken into account when calculating the overall costs of the mortgage arrangement.

Every month, you then pay this interest to the lender for the duration of the loan. The lender calculates your monthly repayments depending upon how the rate you have chosen are set. The monthly interest payments may vary dependent on whether the interest rate is fixed or variable. At the end of the loan period, the lender will expect the initial capital they lend you to be repaid in full by whatever means you have arranged.

It is the customer’s responsibility to be able to repay the loan at the end of the term.

If you require advice on interest only mortgages on a residential purchase, please speak to one of our experienced mortgage advisers. Mortgage lenders will require bigger deposits/equity to allow you to go on an interest only mortgage. A suitable repayment vehicle alongside your interest only mortgage is required. Please speak to one of our experienced advisers, we're based in Manchester. We are mortgage brokers and will find the right mortgage lender.

A mortgage is a loan secured against your home or property. Your home may be repossessed if you do not keep up repayments on your mortgage.