What is an interest only mortgage?
Interest only mortgages are mortgages that only need the interest of the mortgage paid each month. With an interest only mortgage the entire mortgage is repaid at the end of the mortgage term, which usually results in a large one off mortgage repayment.
Interest only mortgages repayments are usually low and often are some of the lowest available in the mortgage market. This may be an attractive prospect, especially if you want to minimise your monthly outgoings.
It should be noted that the monthly payments are smaller than almost any other type of mortgage; however, the interest charged over the full mortgage term is often high.
In addition, interest only mortgages may put you at higher risk of negative because the monthly payments do not reduce the overall mortgage balance.
Virgin Money offer their customers a number of mortgage deals including interest only mortgages. Use our Virgin Money interest only mortgage calculator at the top of the page to help you find a mortgage deal that suits your financial needs.
Why do people choose an interest only mortgage?
If you think your mortgage payments are too high, you could look into an interest only mortgage.
Interest only mortgage when mortgage deal has come to an end: The end of your initial mortgage can present an opportunity to improve your monthly payments. The Virgin Money calculator at the top of the page allows you to see the best interest only mortgages available.
Release equity in your home: One way to fund a project is to release the equity in your property. By remortgaging with an interest only mortgage, not only can you access a substantial amount of funding, but also minimise the amount you pay each month on your mortgage. Releasing the equity in your property with an interest only mortgage could be used for:
- Home improvements
- New Kitchen
- New Ensuite bathroom
- Consolidate other existing debts.
Depending on the amount of equity in your property, you could access all the funding you need from a Virgin Money interest only mortgage.
How to get an interest only mortgage
There is not one definitive set of criteria for an interest only mortgage. However, there are some common lender requirements. Typically, the majority of lenders will require the following:
- A repayment vehicle strategy: Before a lender will grant an interest only mortgage, they will request the details of how you intend to repay the mortgage. This is known as a repayment vehicle strategy. An example of a repayment vehicle strategy is using the proceeds of the sale of your existing property.
- A low loan to value (LTV): Lenders will not provide a mortgage with a large LTV and often will only lend up to a percent of your property’s value; this is commonly under 75% LTV. Although higher LTV mortgages are available, they are only accessible through professional brokers.
Independent Mortgage Advice
Remortgaging is particularly popular at the moment as interest rates are low.
Whether it will be a good idea for you to remortgage depends on a number of factors, including your goals and your personal circumstances.
However, in general, if interest rates are lower than you are currently paying on your mortgage, it may be a good time to remortgage.
If interest rate are higher than you are currently paying, it may be better to look at other options, such as a second mortgage or a personal loan (if you aim is to borrow more).
If you are not sure whether now is the right time to remortgage, it is a good idea to speak to an independent mortgage broker who will be able to offer impartial advice.