Interest Only Mortgages
A conscious choice
An Interest Only mortgage is an effective means of lowering your monthly payment by removing from it the capital element that you would contribute towards on a Repayment mortgage. It is important to remember that unless you make any overpayments of capital during the term of an Interest Only mortgage, the full balance will remain on in its expiry and you will need to have an available means of repaying this to the lender.
When recommending an Interest Only mortgage we will take the time to understand your objectives before aligning these with the criteria of suitable lenders. Some lenders require a minimum level of income to qualify, irrespective of the loan size, whilst all will require a recognised repayment vehicle to repay the borrowing at the end of the term.
Acceptable repayment vehicles for Interest Only mortgages
Accepted methods of repaying an Interest Only mortgage vary between lenders. Whilst some lenders will accept an intention to downsize from your property in the future, others will require repayment by another means.
The other strategies that a lender may use are investments, savings, a pension lump sum and the sale of an additionally owned property.
Get in touch to find out more about your choices, and how we can help you fulfill your Interest Only requirements.
Here's what you can expect from Creative Lending Solutions
Cut through the complexities of finding an Interest Only mortgage
We’ll search the market to find the best fit for you. Fill out our short form and we’ll be in touch to explore your options.
Your property may be repossessed if you do not keep up repayments on your mortgage.
RIO Mortgages - a short guide
A Retirement Interest Only mortgage is a loan secured against your property for which you will pay only the interest to the lender until you die or move into long term care. The capital is repaid by the sale of your property when either of these events occur, but you are permitted to repay the borrowing sooner should you wish. You will have no penalty to repay early, provided that you are no longer tied in to a particular deal, such as a fixed rate.
A RIO mortgage does not require you to have a separate repayment vehicle for settling the loan and it will instead rely on the equity in your property to do this. The minimum amount of equity with one lender is 25%, meaning that the mortgage may be 75% of your property’s value.
You will need to demonstrate a suitable amount of pension income to achieve a RIO mortgage and this must continue for the remainder of your life. For a joint application, each applicant must be able to show a sufficient income to cover the mortgage affordability independently of the other. Any spousal entitlement that passes between couples upon the death of one will be considered in the affordability assessment. The typical income multiple applied for a RIO mortgage is 4.5, although there can be slight variations among lenders.
A Retirement Interest Only mortgage provides an excellent alternative to a standard Interest Only mortgage in later life. This is because it removes the requirement to repay the loan by the end of a defined term. It may also be viewed as a strong alternative to an equity release plan because the agreement will last until the end of life but the terms for repaying early tend to be more favourable. With a RIO mortgage you will be paying the interest on a monthly basis. There is no compounding effect and the equity in your property will therefore not reduce as a result of this.
To find out more about obtaining a Retirement Interest Only mortgage, please fill out our short enquiry, give us a call on 0330 133 6183 or use our live chat facility. We’ll be very happy to help.
Interest Only help from Creative Lending Solutions
Creative Lending Solutions can help by sourcing an appropriate Interest Only lender for your circumstances, ensuring that their particular criteria requirements are met.
By understanding the unique requirements of one lender over another this better helps us recommend the most appropriate option to you; whether this is simply to obtain a more favourable deal, to raise additional borrowing or to make other changes to your mortgage arrangements.
If you decide to proceed with our recommended option, we will be on hand at every step of the new mortgage process. We will complete the lender’s application form and forward them your supporting documentation. We will respond to the lender’s underwriter with answers to any questions they may have and to offer assurances where they may be required. Once your new mortgage offer has been issued, we will remain available for any questions you may have and for any changes that may be needed up until completion.
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