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Interest Only
In the UK, there are many Interest only mortgages currently held by existing borrowers. Yet interest only mortgages have had negative press in recent years, mainly due to borrowers being affected by shortfalls on the performance of investments such as endowments.
For these borrowers putting all or part of the mortgage on repayment is a possible solution, many lenders have entered the market with ‘part interest only’ and ‘part repayment’ mortgage products.
Apart from this, however, there are often many good reasons to consider taking a residential mortgage on a pure interest only basis. Below are a few scenarios
Sale of Property – At Retirement
Age may be a factor in requiring an interest only mortgage, if a borrower is close ie: 5-10 years to retirement age but does not wish to retain the property beyond retirement, then interest only may permit the applicant to have manageable monthly payments and to sell the property prior to retiring.
We can advise on all interest only lending solutions to fit your needs.
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Sale of Property – Downsize
A client may have plenty of equity within the property and the plan is to use this equity to downsize to a smaller property (with no mortgage) once family circumstances change. Therefore repaying the loan is not a priority for the applicant in comparison to having more monthly disposable income.
At MyMortgageDeal.co.uk we can advise on all interest only lending solutions to fit your needs.
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Sale of Property – Investment
High Net Worth Individuals ( HNW) and those that want to invest in property for letting purposes may see interest only as the only way to proceed practically and affordably.
Clients may want to raise capital to fund a deposit or outright cash purchase of a BTL or Holiday Home. The sale of the BTL or Holiday property may be the way the interest only loan is repaid.
We can advise on all interest only lending solutions to fit your needs.
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Case Study – Interest Only Downsize with overseas purchase
Mr & Mrs G ( Midlands) both aged 61 and both still working. Mr is self employed as an accountant on £45K and Mrs employed within Government on £46K they had a property worth £855,000 with a small mortgage of £55,000. Equity within the property circa £800,000.
Only 4 years ago the couple changed their mortgage to repayment with the intention of repaying it all by age 65, The result was it had increased their payments significantly to £605 per month, even though they would have sufficient savings and investments to repay at age 65 in any case.
In reviewing their needs and future goals the couple had decided that they would like to keep their monthly payments much lower, and at age 70 both of them would prefer to retire, sell and downsize to a smaller property in the same area.
They also wanted to release some capital to purchase a holiday home in Spain for £200,000 using holiday lets to cover property ownership costs, and they could use it for family holidays at other times.
After speaking to us, we advised an interest only mortgage for £270,000 over a 9 year term with sale of property as the repayment method. This reduced their monthly payment to £495 per month saving them over £200 per month in payments and helping them to realise their future goals and to secure their holiday home ambitions.
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