What are Interest Only Mortgages?
Posted on 15 November 2018 by Edward
I’ve heard a lot about Interest Only Mortgages and wondering what they are and how they differ?
It’s estimated that there are 1.6 million homeowners currently in the UK that are on an interest-only mortgage. This type of mortgage is where you only pay interest during the mortgage term and then repays the full amount you borrowed when the mortgage ends or matures.
It is most certainly possible to obtain an interest only mortgage, but you will need to tell the Lender how you intend to repay the loan. Depending on your circumstances, there are some Lenders who will accept the sale of the property as a repayment vehicle or the sale of a second property, so it would not be necessary for you to start a specific investment for this purpose.
Most lenders will only grant you a mortgage to the age of 75 and will want to know how you intend to pay back the debt at the end. They and any mortgage adviser involved in arranging the mortgage have a duty of care to ensure that you have the means to do this and are not left in a position of being made homeless 20 years or so down the line.
If you are in any doubt about this or which Lenders to approach I recommend that you speak to an independent mortgage broker like us about your circumstances on 0344 346 3672.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.