top of page
Lifetime Mortgages, Contractor Mortgages, Property Development Finance in Kent

OUR LATEST NEWS

MORTGAGE BROKER BLOG

Interest Only Mortgages

Writer's picture: MRGMRG

Updated: Jul 26, 2024

Coins coming out of a jar

In the last few months, we've seen an increasing amount of interest only enquiries from existing property owners looking to reduce their monthly payments due to the increase in rates. Interest only mortgages can be an attractive option for mortgagers looking to lower their monthly payments and delay paying the capital off. However, they also come with some unique risks and considerations that borrowers should be aware of.


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 each month, rather than paying down the original balance. This means that the borrower's monthly payments are lower than they would be with a traditional mortgage, but it also means that the borrower will still owe the original loan amount at the end of the mortgage term.


Who is eligible for an interest-only mortgage?


Interest only mortgages are typically available to borrowers with a higher income and a larger deposit or equity in their current property, as lenders may view these borrowers as less risky due to their financial stability. However, borrowers must still meet certain criteria and be able to demonstrate that they will be able to repay the loan at the end of the term, called the 'repayment vehicle' This could be the sale of the mortgaged property at the end of the mortgage term, a pension lump sum, sale of another property or a combination of these strategies.


What are the risks of an interest only mortgage?


The main risk associated with an interest only mortgage is that the borrower will be unable to repay the original loan amount at the end of the term if the repayment vehicle is not sufficient. If the borrower is unable to refinance or sell the property to repay the loan, they may face repossession.


Additionally, interest only mortgages can be more expensive in the long run, as the borrower is only paying the interest and not building equity in the property. This can result in a higher overall cost of borrowing.


At MRG Private Clients, we believe in providing our clients with personalised guidance and support when it comes to making important financial decisions. If you're considering an interest only mortgage or have questions about the options available to you, please get in touch or you can visit our dedicated Interest Only Mortgage information page >



 

At MRG Private Clients, we believe in providing our clients with personalised guidance and support when it comes to making important financial decisions. We are based in Medway, Kent but offer our specialist mortgage services nationwide. Learn more about our specialist mortgage services >

9 views

Recent Posts

See All

Comments


Lifetime Mortgages, Contractor Mortgages, Property Development Finance in Kent

MRG Private Clients LTD is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference 797843. The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK.

The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages. As a mortgage is secured against your home or property, it could be repossessed if you do not keep up the mortgage repayments. A lifetime mortgage will be secured against your home. Think carefully before securing other debts against your home.

MENU

CONTACT

The Joiners Shop, Main Gate Road, The Historic Dockyard, Chatham, Kent, ME4 4TZ

SUBSCRIBE

© MRG Private Clients LTD 2024 (Registered in England No. 07837151)

bottom of page