Interest-only mortgages have been prevalent in the press and on the political agenda for the last few years as a result of miss-selling, short-sightedness and abuse of the product in some instances. As a result, many lenders tightened their criteria for an interest only mortgage.
Consequentially, the whole industry has taken stock of its position on how interest-only mortgages are used, explained and justified. Interest-only mortgage applications are now scrutinised fully, questioned, and in many cases classed as high risk.
Increased affordability criteria have led to interest-only mortgages becoming less common, particularly for high net worth individuals. However, we have access to an extensive network of lenders so will be able to take a complete view of your situation and guide you in the interest only mortgage market.
If you would like an interest-only mortgage, it’s necessary to be able to justify why this is the most sensible option. There must also be an exit strategy in place to repay the capital at the end of the mortgage term.
Repayment plans generally need to be documented, and interest-only should never be used if the borrower can’t afford the monthly payments on a capital and interest mortgage.
Secondary property, bonus income, stocks and shares can all be used as leverage – or a mixture of interest only and capital and interest can also be a good option.
For higher levels of borrowing or low loan to values, interest-only is still readily available. For high net worth individuals with a strong financial profile and the ability to repay the mortgage, this type of mortgage makes sense – especially from a long-term planning perspective.
In our view, interest-only mortgages are an important product for many, especially in London.
It’s a viable product for people whose income is made up of large bonuses or commissions, and it’s also sensible for those who plan to live in their property for a short time, or have other assets which will cover their mortgage debt.
Many of our clients request interest-only mortgages at the outset of our conversations and we are experienced in arranging such property financing. However, we will always discuss the availability of them and any other options to ensure it’s the correct route for your circumstances.