Under an interest only mortgage, the borrower pays just interest to the lender each month. Capital is then paid at some future date, often from an investment such as:
- An endowment policy. This type of policy used to be the very popular way to repay the mortgage in the 1990s. This low cost version of this type of policy promised the best returns. However in recent years the policy type has received adverse publicity due to many falling short of its projected targets.
- An ISA or other investment products. Offers greater tax benefits.
- A Personal Pension. Less Common nowadays.
- Some lenders (only a few) will accept sale of existing properties or inheritance. This depends on the loan to value or the deposit put down.
- An interest only mortgage alongside an investment vehicle, appeals to someone whom is confident their investment will cover the capital when it comes to be repaid, however this is not guaranteed.
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. There are very few interest only mortgage available since regulations. 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 Vale of Glamorgan. We are mortgage brokers and will find the right mortgage lender.