Interest Only Mortgages
The current mortgage market in 2019 has seen some very positive changes in the way in which some of our lenders view interest only plans. Provided that the lender is happy with the client and the circumstances relating to the application we can now offer up to 75% LTV as long as the lender is happy with th\e planned exit route from the mortgage.
With the population now living that much longer and with clients who can fund the mortgage repayments from their pension / investment income lenders have taken a more flexible approach and will consider a mortgage up to 65% LTV in retirement .
It is not unusual for clients to downsize in retirement but there are clients who still wish to have a small mortgage in order that they have a little more choice of where they wish to spend their retirement years.
This is a very fast growing market with some lenders having a mortgage term up to age 99, and of course we are also seeing a great deal more clients looking at Equity Release as an answer to remain in their current property.
If you would like to discuss your options in todays market, please call or email me to see how we may help you.
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More About Interest Only Mortgages
Lenders will still consider interest only mortgage plans but you should have in investment/pension/savings plans that are in place and can repay the capital. The stock market has also taken a real hit in values which again places a big strain on the ability of some plans to repay the debt, I am sure that in the future clients may take more of a balanced view towards lending and how they plan to repay the debt, with a part of the mortgage being capital and interest and the other part linked to investment plans with various end dates that may help to reduce the debt at an earlier stage in the life of the mortgage term.
As we come out of the market downturn lending will become more flexible but the lessons should be learned do not rely on the rise in property values to repay your mortgage and investments do go down as well as up. If the idea of renting is not desirable and you feel that you could not afford a mortgage at the present time then why not take an interest only mortgage until you are able to pay capital and interest. Interest only mortgages is where your monthly payments are composed of interest only ignoring capital, as a result the balance of your mortgage will remain the same and will not be reduced until you decide to pay a mix of capital and interest.
Some lenders charge interest on a daily basis and others on an annual basis, if possible its ideal to avoid annual interest calculations as you pay the same amount of interest throughout the year until the year is up and the interest is recalculated which results in you paying more. If the interest is calculated on a daily basis the interest is recalculated as you pay the capital on a property meaning a deduction in the interest rate. Interest Only Mortgages If you proceed in taking out an interest only mortgage it is important that you consider how you will pay the mortgage at the end of the term. Many use interest only mortgages to stand ground in their new property until they have a secure income and or financial routine, many first time buyers also opt for interest only mortgages to get onto the property ladder.
It is also important to remember that failiure to repay the mortgage at the end of the term can lead to reposession. Interest only mortgages are not always suitable as borrowers should be aware that when switching from interest only to capital and interest will mean an increase in the monthly payments, it is important that you consult with a qualified financial adviser such as us before you opt for an interest only mortgage. Popular Uses Interest only mortgages for first time buyers Interest only mortgage for buy to let or investment properties Remember! Interest only mortgages are generally lower then mortgage payments but this will change upon switching to capital and interest.
It is always a good idea to consider your affordability, remember if you can afford capital repayments during the term ensure that you can maintain throughout the duration of the term to avoid risk of property repossession. We are independent financial advisers regulated by the FCA if we can assist you further with your enquiries we will do our best to help you. Give us a call today on 0345 2 605 506 or fill out our call back form and we will call you. This is a very popular way to buy a home. This type of mortgage is designed to offer the lowest monthly payment possible as you are not paying off any of the capital balance of the Finance. Due to the lower payment, you may be able to afford a more expensive property and stay within your interest only mortgage budget.
The overall cost for comparison is 5% APR. The actual rate available will depend on your circumstances. Ask for a personalised illustration.