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MORTGAGE BROKER IN KENT, LONDON & SOUTH EAST

INTEREST ONLY MORTGAGES

An interest only mortgage is one where the borrower only pays the interest on the money borrowed, this means a balance will remain at the end of the mortgage term. A repayment strategy is required to pay the mortgage off at the end of the term.

Key Features

Borrower pays only interest during term

Full loan due at end of term

Lower monthly payments

Requires solid repayment strategy

Higher risk if not managed properly

Interest Only Mortgages Kent London

Want to know more about Interest Only Mortgages? Speak to an expert today.

What Is An Interest Only Mortgage?

An Interest Only mortgage is a type of mortgage where the borrower only pays the interest on the loan during the mortgage term, without reducing the principal balance. The full loan amount remains due at the end of the term. This differs from a repayment mortgage, where monthly payments cover both interest and a portion of the principal.

Who Is An Interest Only Mortgage For?

Interest Only mortgages are typically suitable for:

Residential, buy-to-let or even commercial borrowers

Individuals expecting large sums of money in the short-term

Those with a good repayment strategy, pension, other properties etc

Buy-to-let investors looking to benefit from the rental income in the short term

What Are The Advantages Of An Interest Only Mortgage?

Lower monthly payments compared to repayment mortgages, more disposable income during the mortgage term

Flexibility to invest money elsewhere that might have gone towards repaying the capital

Potential cash-flow benefits for buy-to-let investors

What Are The Disadvantages Of An Interest Only Mortgage?

The balance of the mortgage not being reduced, risk of negative equity if property values fall

Need for a solid repayment strategy at the end of the term

Potentially higher overall cost due to interest on the full principal amount throughout the term

Limited availability as many lenders have tightened criteria for these mortgages

Examples Of Where An Interest Only Mortgage Can Be Used:

Buy-to-let property investments

Property development projects

High-net-worth individuals with complex income structures and assets in the background

Bridging finance for those expecting a lump sum in the future (e.g., inheritance, business sale)

It's crucial to note that Interest Only mortgages carry significant risks if not managed properly. Borrowers must have a clear, realistic plan for repaying the capital at the end of the term. Many lenders now offer part-and-part mortgages, where a portion is repayment and a portion is interest-only, as a middle ground option.

Process And Documentation Required For An Interest Only Mortgage

Standard mortgage application process

Proof of income and affordability

Detailed repayment strategy plan

Evidence of assets or investments intended to repay the mortgage

Larger deposit often required (typically 25% or more)

Mortgage Broker Kent London

HAVE AN INTEREST ONLY MORTGAGE ENQUIRY?

Get in touch or book a call to discuss it in more detail.

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