Interest Only Mortgages
Maybe you have sufficient equity in your property to enable you to downsize and purchase a suitable home in the future without the need for a mortgage?
The minimum equity acceptable for this method will depend on where you plan to buy in the UK.
You may be due a substantial future inheritance that would enable you to repay any loan or wish to repay the loan by making ad hoc lump sum payments.
You may wish to switch to some type of Equity Release or Lifetime Mortgage product in the future.
Are you looking to take out an interest only mortgage or to replace an existing interest only mortgage that is coming to an end?
Many lenders are making it virtually impossible for you to take out an interest only mortgage and either do not offer them at all or will not offer them beyond age 65. In addition they expect you to have a minimum amount of equity in the property or a traditional repayment vehicle such as an ISA or endowment.
We have high street building societies and specialist lenders who will take a more flexible approach to interest only mortgages.
There are various lenders that will still consider interest only mortgages, however all will have qualifying criteria.
If the intended method of repayment is that you plan to downsize in the future without the need for a mortgage, then the amount of equity in the property would have to be realistic for you to do so.
Lenders might also allow part of the mortgage to be on a capital repayment basis to increase future equity available for downsizing.
Some lenders insist on a minimum amount of equity such as £100,000 or 50% of the property value.
If in the process of re-mortgaging you consolidate other non secured debts into your mortgage, you should be aware that by taking these commitments over a longer period you will pay back more in interest over the term
If you are re-mortgaging away from your existing lender be careful and check whether or not you will incur any early repayment charges.
*If you wish to re-mortgage to consolidate other non secured debts you should be aware that by taking the mortgage over a longer term, then you may pay back more in interest over the term.
*Subject to status.