Interest Only Mortgages
Are you eligible?
It was fairly common, pre-credit crunch, to be able to get a residential mortgage where you only had to repay the interest accrued each month. That would mean that an interest-only mortgage gives you cheaper monthly payments on your home loan but you are not actually paying back any debt. You were still expected to repay the capital eventually, but you’d be allowed to have an alternative strategy for doing this, rather than simply paying off a bit of capital each month. Those taking out interest-only deals without repaying capital were taking a major risk if property prices fell, as their debt could be bigger than their home’s value, and even if the value of their home rises the initial debt will not decrease. Subsequently immediately after the aftermath of the credit crunch most lenders steered clear of lending on an interest-only basis.
Currently Interest-only mortgages are still available, but they are rarely offered to borrowers at the lower end of the affordability scale. Instead, criteria is likely to include a very high minimum income and a substantial deposit – usually of at least 25% and sometimes as high as 50% In addition, it’s likely you’d need to show evidence of a robust repayment plan. The basic rule is that interest-only mortgages are likely to only be available to those well-off enough to afford a standard repayment mortgage – not to people looking for lower monthly payments because that’s all they can afford.
At the Independent Mortgage Store we can review your details and clarify what criteria you must meet should you wish to look at taking an interest only mortgage option.
93 Byres Rd, Glasgow, G11 5HW
Our Phone Number
0141 337 3393