What is an interest only mortgage?
A mortgage that only requires the payment of the interest on the entire capital borrowed is an interest only mortgage. Although only the interest of the mortgage needs paying monthly, at the end of the mortgage a large one off payment is needed to repay the full mortgage amount.
The monthly mortgage payments for an interest only mortgage are often some of the lowest available. However, the interest charged over the full mortgage term is often higher than standard mortgages.
As interest only mortgages do not require you make any capital repayments until the end of the mortgage term, they expose you to higher risk of falling into negative equity.
The interest only mortgages on off with Yorkshire bank may give you the financial freedom you need. Use our Yorkshire Bank interest only mortgage calculator at the top of the page to help you find the best deal for you.
Why do people choose an interest only mortgage?
Typically, people choose interest only mortgages to reduce the amount of money they pay out each month for their mortgage.
Interest only mortgage when mortgage deal has come to an end: You can get a lower minimum mortgage payment through an interest only mortgage. If your initial mortgage deal has come to an end, you may want to review the Yorkshire Bank interest only mortgage calculator at the top of the page to see what an interest only mortgage can do for you.
Release equity in your home: If you have a home project that you need finance for, then releasing the equity in your existing home could be a good way to raise the funds you need. By remortgaging with an interest only mortgage you could access the finance you need and reduce your monthly mortgage payments.
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.
Any home project will require a certain amount of finance, which you could access through a Yorkshire Bank interest only mortgage.
How to get an interest only mortgage
Lenders’ requirements will vary depending on who you approach. However, the majority of lenders will require the following:
- A repayment vehicle strategy: To ensure that you repay the interest only mortgage at the end of the term, lenders will require the details of your repayment vehicles strategy; this is the method you intend to use to repay the mortgage. An example of a repayment vehicle strategy is using the proceeds of the sale of your existing property.
- A low loan to value (LTV): Although you can secure a significant amount of finance through an interest only mortgage, lenders will often only lend up to a percentage of the value of the property. Typically, the highest LTV a lender will allow is 75%; higher LTV mortgages can be sourced, but this usually requires the assistance of a professional broker.
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.