![]() Deposit – The LTV (loan to value) amount offered on interest-only mortgages is typically lower than for repayment mortgages, making the deposit requirement greater.There are lenders that will consider first-time landlords, however, these are likely to be more specialist providers. Experience – If you’re looking to purchase for investment purposes, some lenders will prefer that you have prior landlord experience, particularly in the case of HMO (house of multiple occupancy) mortgages.There are also some lenders with no maximum age requirement. Age – Most lenders have minimum and maximum age thresholds, although some interest-only mortgages are intended specifically for older borrowers, such as a RIO ( Retirement interest-only). ![]() Luckily there are specific bad credit lenders, and bad credit brokers who specialise in this area. However, serious credit issues could still be a stumbling block. Credit history – your credit rating will be less impactful to the outcome of your mortgage application than it would for a capital repayment mortgage, especially in the case of buy-to-lets.Income and affordability – you’ll need to prove that you can afford the repayments, and, in many cases, that you have an income in line with the lender’s minimum income threshold for this mortgage type.Lenders will typically expect you to meet the following requirements: If you’re able to meet the criteria, however, it’s perfectly possible to use an interest-only mortgage to purchase residential property.Ĭriteria varies from lender to lender, although will generally be stricter across the board in the case of residential purchases. In fact, some lenders will only consider this type of mortgage for high-net-worth individuals. Often there are large deposit and/or equity requirements and high minimum income thresholds for residential purchases. In the past few years, however, interest-only mortgages have become more commonplace for residential purchases again, albeit with stricter criteria. Since the financial crisis in 2008, lenders have been more reluctant to offer interest-only mortgages on residential purchases, but have continued to offer them almost exclusively for buy-to-let investment purchases. Yes, although they are not as readily available as they once were and the lending criteria for them is usually more stringent compared to residential mortgages. Finding the right lender and securing the best deal for youĪre they still available for residential properties?.Using our free broker-matching service you can speak straight away to the right broker by simply making an enquiry online. They’ll be able to help with: Your first step should be to find a specialist mortgage broker with experience arranging interest-only mortgages as this will boost your chances of getting approved at the best terms available. Each lender has its own list of acceptable repayment vehicles, and this can range from the resale of the property to investments and savings A typical term is around 25 years, however, in most cases, the lender will need to agree with your repayment strategy as part of the application process. It’s vital you have an effective repayment vehicle (method of loan repayment) in place to repay the lender the original capital borrowed at the end of the term. This is because mortgage interest is charged on the total amount you owe, and as the amount you owe doesn’t reduce, the interest charged will not change either. Whilst this can be a great way to keep costs low throughout the duration of the mortgage, as monthly payments will be significantly lower than repaying capital and interest together, you will end up paying more overall. At the end of the mortgage term, you’ll still owe the full amount borrowed, which will need to be paid in full at this point. As you might expect, an interest-only mortgage is a type of home loan whereby only the interest is repaid each month throughout the term. ![]()
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