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Interest-Only Mortgage Rates

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Interest-only Mortgage Advice

An interest-only mortgage can provide you with a more flexible way to manage a loan on your property, especially if you are investing in a Buy-to-Let, either as an individual or a landlord running their business through a limited company.

An interest-only mortgage hinges around having sufficient means of repaying the full loan amount when the mortgage comes to term, and you will need to verify to lenders that you have an effective ‘repayment vehicle’ in place when you apply, which will likely need to be something other than simply the anticipated proceeds from the future sale of the property.

The key questions will always be: How much is the interest on an interest-only mortgage? Is the interest more expensive than for conventional residential mortgages? And how can I keep the rates quoted to a minimum? In this section, we aim to shine more light on the rates you can expect for interest-only mortgages.

What can you expect for Interest-Only mortgage rates?

Homebuyers will be pleased to know that within the mortgage market there is no separate set of rates for interest-only mortgages. You can expect the same kind of rates as for standard residential mortgages, which do of course vary significantly from one product to another, depending on many other factors in the deal (introductory period, level of deposit, LTV ratio, etc.). So, unfortunately, we are not able to offer a precise guide or bracket.

Interest rates and the level of deposit required are typically a little higher for Buy-to-Let properties, but if you are taking out a mortgage as a landlord then it’s worth noting that the interest you pay can be tax-deductible. Although there were changes to the rules on tax relief for independent landlords in 2016, it’s still worth seeing what you might still qualify for, particularly if you operate as a limited company.

Interest-Only Mortgage Information

How to find the right Interest-Only mortgage rates?

As the majority of lenders offering interest-only mortgages do not publicise their products on the high street or online, you may have to do a lot of research to unearth a range of options from which to form a bigger picture and judge what constitutes the ‘right interest-only rate’, especially for your particular circumstances.

However, if you are prepared to do a lot of groundwork, then the way to ensure you get the most favourable possible rate is to thoroughly prepare your mortgage application ahead of presenting it to the lender. Since tighter regulation came into place following the dive in savings interest rates after the credit crunch – which left many homeowners with interest-only mortgages in serious financial trouble – the Financial Conduct Authority now requires lenders to verify that the borrower has a realistic plan for repaying the full mortgage amount when they reach the end of the term of the loan.

You’ll have to show details of how you will manage your ‘repayment vehicle’ – which could be an ISA, pension or other kind of investment plan – with a forecast for its growth. To further help you access the lowest possible interest rates, you could also aim to provide the highest possible amount of deposit.

Talking to a range of lenders – from the few on the high street who may offer you an interest-only mortgage to the smaller specialist lending companies – will give you a good grasp of what to expect with current interest rates, which lender can offer the most favourable deal and might best understand your particular circumstances. Many factors could affect the quote a lender will give you – from you wanting a loan as interest-only for a specific period before switching to repayment or part-and-part after a time, to the level of equity you already have in property, or you planning to use an expected windfall to pay off the mortgage amount.

This process can be sped up significantly, and your options will broaden beyond what you are likely to be able to access yourself by speaking to an experienced mortgage broker who specialises in interest-only mortgages. Our team at The Mortgage Centres has an in-depth knowledge of the mortgage market and understands the industry inside out.

You’ll be looking for expert advisers and brokers who can provide:

  • Specialist knowledge and insights into interest-only mortgages.
  • Free initial consultation and no-obligation quotes.
  • Unlimited access to the market.
  • A 5-star service that has gained hundreds of 5-star reviews.

With our established connections and positive relationships across the network of home-loan providers in the UK, we are able to deliver fully personalised quotes and give you access to the most competitive deals available, some on an exclusive basis.

Give us a call today to find out your options and get on track towards exactly the right interest-only mortgage to meet your needs, goals and circumstances.

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