There are two main ways to pay back your mortgage, repayment or interest-only. An interest-only mortgage means that you will only pay the interest on the loan, and at the end of the term you will still owe the original amount you borrowed. This means your monthly repayments could be lower than a repayment mortgage. At Watts, our expert mortgage advisers can help talk you through your options and which is best suited to your individual circumstances.Interest-only mortgages became popular on the build-up to the 2008 financial crisis, where customers were able to borrow without showing lenders how the debt would be paid back. After the credit crunch, many of these customers realised they would struggle to pay off the loan at the end of the term. For this reason, interest-only mortgages can be much more difficult to obtain.
The lending criteria for an interest-only mortgage can be strict, and it is not suitable if you are a first-time buyer. Lenders will typically only let you borrow up to around 50% of the property value, meaning you will likely need a large deposit or equity in your existing home. With this in mind, interest-only mortgages can be suitable for high-net worth individuals, or existing homeowners with a lot of equity looking to remortgage. Interest-only mortgages are usually suitable for buy-to-let purposes, as the landlord will be earning rental income and the property is treated as an investment. It can allow landlords to maximise the money they will receive each month, and allow them to reduce the mortgage capital when it suits them.
At Watts we have a team of expert advisers who can access the whole of market to find the right mortgage lender to suit your circumstances. Typically many lenders won’t lend directly to borrowers, instead choosing to work with specialist mortgage brokers like ourselves. We have the experience to identify the lenders that will be happiest to consider your application, with well-established relationships to help easethe process. If you are hoping to take out an interest-only mortgage, it’s crucial that you know how you will repay the capital at the end of the term. If you begin to worry about this, it’s important to take action as soon as possible. Our team are here to listen to your concerns and help you understand your options.
To speak to an independent mortgage adviser for financial advice, get in touch on 01270620555 or email us at firstname.lastname@example.org.