We’ll compare live interest only mortgage rates as of December, 2024.
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An interest-only mortgage is a type of home loan in which the borrower is required to pay only the interest on a loan for a set period. The remainder of the mortgage is paid either in one lump sum on a specific date, or in subsequent future payments.
Unlike other types of mortgage, the borrower does not need to pay back any of the original capital borrowed in their monthly payments. This means that their monthly payments will be lower but in the long run they will still be paying back the full amount.
Interest-only mortgages are great for those looking for cheaper monthly payments as they can make the mortgage more affordable. However, at the end of the loan term (typically 25 years), you would still need to pay back the full amount to the lender.
For repayment mortgages, on the other hand, your monthly payments would be more expensive but at the end of the loan term the borrower would not owe anything to the lender and they would own the property outright.
Lending Expert is an interest-only mortgage broker and can compare over 1,000 mortgage deals across the UK. Whilst high street banks can offer interest-only mortgages too, we can help find the best option for you with rates from 1.39% per month, whether you are looking for interest-only, fixed, variable, tracker or have a bad credit history.
Start by clicking on ‘Check my Eligibility’ below and enter some basic details about you and your property – and Lending Expert will be able to help you find the best interest-only mortgage according to your requirements.
An interest-only mortgage is a home loan in which you make solely interest payments for the first several years of the loan rather than a monthly payment which combines both principal and interest.
These interest-only payments can be made for a specified time period or can last throughout the duration of the loan. However, if this is the case, the full payment will need to be made at the end of the loan term. Typically, interest-only loans are structured similarly to adjustable-rate mortgages.
Although interest-only mortgages mean lower monthly payments for a period of time, they require a large payment at the end of the interest-only period and means that you are not building up any equity.
The amount you will pay per month on an interest-only mortgage will depend on many factors. The key thing to consider is the overall amount you plan to borrow for your home loan. For example, if you take out an interest-only mortgage of £100,000 with a 5% interest rate paid over 25 years, the monthly repayments would work out at £417 monthly; although, you would still need to pay back £100,000 at the end of the loan term.
To work out exactly how much your interest-only mortgage would cost, use our calculator or speak to one of our team at Lending Expert today.
We proudly offer interest-only mortgages across the entire UK, Scotland and Wales including Birmingham, Brighton, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, London, Manchester, Nottingham, Newcastle, Sheffield and more.
Speak to an expert today in order to find out how much you can borrow from an interest-only mortgage.
Many different factors could impact your eligibility to secure an interest-only mortgage.
These include, but are not limited to, the following:
Make an enquiry from our team of experts to find out more about your eligibility for an interest-only mortgage.
Interest-only mortgages are not advisable for first-time buyers due to the strict lending criteria requested by the majority of lenders.
These mortgages are only really suitable for those who are able to put up a large deposit up front. Typically, lenders will only let you borrow up to 50% of the property value, meaning that you will need to put up the other 50% up front.
For high-net-worth individuals, these mortgages can be a great way to minimise monthly payments and pay back everything in one lump sum in the future. It is recommended that those with an annual income of at least £100,000 would be suitable for this type of loan.
Income-only mortgages could also be good for existing homeowners who want to remortgage and are able to demonstrate a lot of equity.
The key differences between interest-only mortgages and repayment mortgages are the amount you have to pay back monthly and the amount you have to pay back at the end of the loan term.
With interest-only mortgages, you will pay back a lower amount per month. For example, if you borrow £200,000 over 25 years, at an interest rate of 3%, an interest-only mortgage will mean paying a monthly mortgage payment of £500. This is far lower than the repayment mortgage monthly payment of £948.
However, if we look at how much is repaid at the end of the loan term using the same example, there is a big difference between the interest-only basis and the repayment mortgage.
For the interest-only mortgages, you will have to pay back the full amount of the principal loan at the end of the loan term. On the other hand, with the repayment mortgage, you have already paid back the full amount across the monthly payments and would own the property outright.
Compared to other types of home loans, there are fewer lenders willing to offer mortgages on an interest-only basis. Typically, these lenders have very strict lending criteria, especially when it comes to salary requirements and loan-to-value ratios.
Currently, there are 18 lenders across the UK who offer interest-only mortgages including HSBC and Post Office Money. At Lending Expert, we compare the interest-only mortgage market in order to find the best provider to suit your needs.
Rather than approaching the lenders directly and dealing with their in-house advisors, working with a mortgage broker will offer impartial advice to get you the best deal on the market.
Working with a mortgage broker such as Lending Expert will help you find the best mortgage to suit your circumstances without impacting your credit rating.
Contact us today to speak to an expert and start comparing interest-only mortgages to find the best option for you.
Prospective buyers should always consider the following factors before deciding to take out a interest-only mortgage:
Your interest-only mortgage is secured against the property meaning that any late repayments will lead to a damaged credit score, late penalties and maybe even risk of property repossession from the lender.
You are able to switch from an interest-only mortgage to a repayment mortgage, but your monthly repayments will increase.
Working with a number of high street banks and specialist mortgage lenders, Lending Expert has access to over 1,000 mortgage deals available and is in the perfect position to help you get approved and get the best rates.
Our eligibility checker is completely free to use and can provide an indicative quote, with no obligation.
Founded in 2013, we have years of experience working in the secured loan and mortgage market and have helped thousands of customers to date. Our values have always been to find the right product for the right individual at the competitive rate – and we are pleased to offer our services for you today!
Compare interest only mortgages and get the best deals today with Lending Expert.