What is an interest only mortgage?
An interest only mortgage is where you are only obliged to cover the mortgage’s interest each month. Of course, like any mortgage, the full amount that you borrow needs to be repaid at some point; this is often at the end of the mortgage term. If there is a shortfall, then you will still have to repay all the capital at the end of the mortgage term.
Typically, interest only mortgage monthly mortgage payments are lower than other mortgage payments. However, it should be noted that the total amount of interest that you pay over the life of the mortgage will be more than a standard mortgage. In addition, the risk of negative equity is much greater because the mortgage balance is not reducing with every payment.
NatWest offer an interest only mortgage with competitive rates. If you want to explore your NatWest interest only mortgage options, then use the NatWest interest only mortgage calculator at the top of the page.
Why do people choose an interest only mortgage?
One of the main reasons that people look to secure an interest only mortgage is to keep their monthly outgoings as low as possible.
Interest only mortgage when mortgage deal has come to an end: You could access lower interest rates and smaller monthly payments if you switch your mortgage provider. If your initial mortgage deal has come to an end, you could explore your NatWest interest only mortgage options to get a better deal.
Release equity in your home: If you need to access a substantial amount of money, you could remortgage your property with an interest only mortgage.
People often remortgage to provide money for:
- Home improvements
- New Kitchen
- New Ensuite bathroom
- Consolidate other existing debts.
Remortgaging with a NatWest interest only mortgage may be a good low cost way of paying for a new home project.
How to get an interest only mortgage
There is not one definitive set of requirements for an interest only mortgage, as the criteria will change from lender to lender. However, it is likely that you will need the following to access an interest only mortgage:
- A repayment vehicle strategy: Lenders will need the outline of your repayment strategy to demonstrate how you will repay the mortgage at the end of the term. A repayment vehicle strategy could be the sale of your existing property.
- A low loan to value (LTV): Lenders often will only lend up to a certain percentage of the value of the property. The majority of lenders are reluctant to lend more than 75% LTV. It is possible to access higher LTV through intermediaries such as professional brokers.
If you are not sure whether now is the right time to remortgage or whether you can get an interest only deal, then speak to our independent mortgage broker team who will be able to offer impartial advice.