Interest Only Remortgages
Interest Only Remortgage topics covered below.
- Can I remortgage to interest only?
- Are there benefits to an interest only mortgage? If so, what are they?
- What is an interest only remortgage?
- How is my interest only remortgage repaid?
- Can I get an interest only mortgage anywhere in the UK?
- Interest only remortgage rates and factors
- Can I switch from an interest only to a repayment mortgage?
- Interest only in later life, what are my options?
- Speak to an interest only remortgage advisor
Updated 11th August 2021.
Interest Only Remortgage Advisors.
Our Mortgage Experts Online accredited advisors are specialists in interest only remortgages. Furthermore, our expert’s knowledge will help you to find the right interest only remortgage on the market to meet your specific requirements.
From big high street banks and building societies, to smaller more niche mortgage lenders, there is a lot of choice out there Likewise, this may feel completely overwhelming to you and you may have no idea where to start. Namely, we can offer you guidance and help you navigate the complex world of interest only remortgages.
Because the interest only remortgage brokers we work with are whole of market and offer completely unbiased advice, ensuring that you get the absolute best deal available.
Scroll down for more information and FAQ’s.
Can I remortgage to interest only?
Yes, the process is no different to making a standard remortgage application. You will have to provide your repayment strategy to the mortgage lender, all will have different criteria around what they will accept.
Most lenders will have a minimum loan-to-value of 75%, some will have minimum income requirements and minimum equity requirements.
Are there benefits to an interest only mortgage? If so, what are they?
The main benefit is the lower monthly payment because you are only paying the interest amount. Always remember that the mortgage balance is going to remain the same with an interest only mortgage. Good advice would always be to pay extra off the mortgage, any extra payments will be used as capital repayments (reducing your mortgage balance)
There is always some financial uncertainty with interest only mortgages such as:
- Property value at the end of the mortgage term.
- Investments – what their current value is.
- Housing market at the time.
Depending on when properties were purchased some people may even end up in negative equity (owing more than the property is worth) this makes refinancing almost impossible without adding some of your own funds.
What is an interest only remortgage?
Very simply swapping your interest only mortgage for another interest only mortgage. Firstly, by going for an interest only deal you will still have to pay back the mortgage loan at the end of the mortgage term, as with any remortgage there will be costs involved. The alternatives to interest only remortgages are:
- Part & Part – Part interest only & part repayment.
- Repayment – Ensuring your loan is paid on completion of your mortgage term.
How is my interest only remortgage repaid, which repayment vehicles are acceptable?
With all interest only remortgages your mortgage balance is not being reduced; you are only paying the interest. For the most part, people will rely on the property increasing in value and then selling the property to pay back the loan. However, no one truly knows what property prices will do in the future, so this is not a guaranteed way of paying back the loan. Ordinarily, most lenders will want to have a minimum amount of equity in the property if this is your repayment strategy.
Below are some examples of repayment vehicles that lenders find acceptable:
- Sale of property or sale of another property.
- Endowment policies.
- Stocks & shares including ISA.
- Pension schemes.
- Unit trust.
- Investment bonds.
Each interest only remortgage application will be judged on a case-by-case basis and will be down to other factors. Depending on what your repayment vehicle is, this will ultimately influence the length of the mortgage term each lender would be prepared to offer you.
Your interest only remortgage expert will be able to give you the most up to date advice for your circumstances.
Can I get an interest only mortgage anywhere in the UK?
Every country will have slightly different criteria, in England & Wales most UK lenders will cover the vast majority of areas.
In Scotland there are sometimes restrictions on certain postcodes, in this instance you may need to seek the help of a specialist lender and most certainly an interest only remortgage expert will be needed.
Northern Ireland is similar to Scotland, a number of UK lenders do not lend in Northern Ireland, this means the criteria is stricter with the ones that do. Things to consider:
- Equity in property
- Property value
- Repayment strategy
- Credit history
Interest only remortgage rates and factors.
The interest only remortgage rates you could be offered will vary depending on the lender. There are a number of key factors that will be used: For the most part, interest only remortgages require great care and attention. To begin with your advisor must ensure that you are aware of how you will repay the interest only mortgage. Ordinarily, a repayment vehicle must be agreed by the lender. Likewise ensuring your property is covered by personal protection will also be discussed. As a result of these conversation, you the client will be able to make an informed decision.
- Loan to value
- Repayment vehicle
- Credit history
- Location of property
- Property construction type
The more equity you have in the property the more options generally will be available.
Can I switch from an interest only to a repayment mortgage?
Some lenders will allow you to switch from interest only to repayment directly with them, you will need to meet the affordability criteria and potentially credit scored, another option is to remain on interest only and make over-payments. The best advice is to get a mortgage expert to search the “whole of the market” and find you the best repayment deal available. As a rule, your advisor will always recommend some form of repayment option if this is affordable. In short, paying something off the mortgage balance is better than not paying anything.
Why remortgage to a new lender?
- Change of mortgage term.
- Change of mortgage amount.
- Release equity from the property.
You can see a mortgage calculator by clicking here. this will give you an idea on potential monthly payments.
Can I have part interest only and part repayment?
Yes, this is a middle ground for some people, they are reducing the balance and keeping the monthly payments to a more affordable level. This will still leave a balance at the end of the mortgage term but not as much as interest only. In simple terms the borrowers will pay some of the mortgage balance but not all of it, there will be a reduced portion of the loan to be repaid when the mortgage term ends.
Interest only in later life, what are my options?
How old you are can be a major factor in lenders deciding if, and how much they are willing to lend you. There are some lenders who have no maximum age and other who may cap the age between 75-85.
People’s lifestyle and life expectancy rates have increased, this has made later living lending a growing sector. The interest only remortgage lenders are constantly coming up with new products and criteria for the later living now market.
Equity release may also be a more suitable option. Click here to read all about equity release.
Speak to an interest only remortgage advisor.
There are many lenders available ranging from high street to specialist lenders. Most people go to their own bank, get declined or cannot borrow what they need. However, just because one lender has declined you, do not give up.
Our interest only remortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. Furthermore, all the interest only remortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.
Therefore, the interest only remortgage brokers we work with have experience in dealing with all aspects of interest only remortgages and importantly using the whole of the market to access the absolute best deals available.