What is an interest only mortgage?
An interest only mortgage is where you only have to cover the mortgage’s interest each month.
Like any mortgage, the full amount of the capital that you borrow must be repaid by the end of the mortgage term.
Typically, interest only mortgage payments are some of the lowest available on the market. Despite this, bear in mind that the interest you pay over the life of the mortgage will be higher than other mortgages.
In addition, the risk of negative equity is much greater because the mortgage balance is not reducing with every payment.
Santander offer an interest only mortgage with competitive rates. If you want to explore your interest only mortgage options, then use the Santander interest only mortgage calculator at the top of the page.
Why do people choose an interest only mortgage?
Interest only mortgages offer the chance to secure a lower monthly payment on your mortgage.
Interest only mortgage when mortgage deal has come to an end: Often lenders will increase the interest on a mortgage following the introductory period has ended. If your initial mortgage deal has come to an end and your monthly payments have increased, you could remortgage with an interest only mortgage and pay less each month.
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 Santander interest only mortgage may be a good low cost way of paying for a new home project.
How to get an interest only mortgage
Every lender will have slightly different criteria for their interest only mortgage. However, it is common for lenders to require the following:
- A repayment vehicle strategy: To satisfy the lender that you can repay the mortgage, you will need to provide details of your repayment vehicle strategy. An example of a repayment vehicle strategy could be the sale of your existing property.
- A low loan to value (LTV): Lenders will only lend up to a percentage of the value of the property, this is known as loan to value. Traditional lenders found in the high street will only even lend up to 75% LTV. There are some lenders who are prepared to provide mortgages with higher LTVs, but you will require the assistance of a professional broker to access these mortgages.
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.