Interest Only Mortgages With a Clear Plan for Repayment
Lower monthly payments can free up cash flow, but lenders need to see how you will repay the loan at the end of the term. We help you find lenders whose criteria match your plans and present your repayment strategy properly.
Lower Payments Now, Capital Repaid Later
With a standard repayment mortgage, each monthly payment covers the interest and part of the amount you borrowed, so the balance falls until it is cleared at the end of the term.
With an interest only mortgage, your monthly payments cover only the interest. The amount you borrowed stays the same throughout the term and must be repaid in full at the end, usually from savings, investments, the sale of another asset or the sale of the property itself.
Because you are not repaying capital each month, payments are considerably lower. That can suit people with irregular income, significant investments, expected lump sums or a clear plan to sell or downsize. It can also be a useful tool for higher earners who prefer to direct surplus income elsewhere.
The trade-off is that you will pay more interest over the life of the loan, and you must be confident that your repayment plan will deliver when the time comes.
Repayment Strategies and Typical Criteria
Since stricter rules were introduced following the financial crisis, lenders take interest only lending seriously. Criteria vary widely, which is exactly why specialist advice helps. Common requirements include:
A Credible Repayment Strategy
Lower Loan to Value Limits
Minimum Income Levels
Minimum Equity
We know which lenders accept which strategies and how they evidence them, so we can direct your application to the lenders most likely to approve it, and avoid wasted applications.
Flexible Alternatives
If you do not want, or do not qualify for, a fully interest only mortgage, a part and part arrangement splits your loan so that some is repaid monthly and the rest is interest only. This reduces your monthly payments while steadily lowering the balance you owe.
For older borrowers, retirement interest only mortgages allow you to pay only the interest for the rest of your life, with the loan repaid when the property is sold, usually after you pass away or move into long-term care. Lenders assess affordability based on your retirement income. [CONFIRM WHETHER FUTUREWISE FINANCE ADVISES ON LATER LIFE LENDING; REMOVE THIS PARAGRAPH IF NOT, OR ADD ANY REQUIRED LATER LIFE QUALIFICATION.]
Switching existing interest only mortgages is also common. If your current deal is ending and you are unsure whether your lender will continue on interest only terms, we can review your options early.
Why Advice Matters on Interest Only
Interest only mortgages are often well suited to people with more complex finances, such as company directors, investors and those with variable income. Our accountancy background means we can understand your wider financial picture, including investments, business assets and pension provision, and present it clearly to lenders.
We will also be honest with you. If an interest only mortgage is not right for your circumstances, or your repayment plan carries too much risk, we will explain why and talk through the alternatives.
Frequently Asked Questions
Can I switch my repayment mortgage to interest only?
Possibly, but your lender will need to see an acceptable repayment strategy and assess affordability. We can check what your current lender and the wider market would accept.
What happens if my repayment plan falls short?
You remain responsible for repaying the full balance. That may mean selling the property, so it is important to review your plan regularly. We can help you do that.
Is interest only available for buy to let?
Yes. Interest only is very common on buy to let mortgages. See our Buy to Let page for more detail.
Explore more of what we offer
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Buy to Let Mortgages
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