Best Interest Only Mortgages: Our Top Picks In July 2020

See our selected mortgage interest only deals for July for UK residential property.

Residential – 2 Year Fixed Rates

Type
2 Year Fixed
Initial Interest Rate

 

1.38%

Reverts to 3.59%

Max LTV
60%
Product Fee
Yes
Interest Only
Call NatWest FREE on 0800 158 2934
“Market Leading 2 Year Fixed Rate Interest Only”
£250 CASHBACK

Early redemption charges may apply. Overall Cost for Comparison 4.00% APRC. This is the cost of the mortgage over the full term.

 

Type
2 Year Fixed
Initial Interest Rate

 

1.38%

Reverts to 3.59%

Max LTV
60%
Product Fee
Yes
Interest Only
Call RBS FREE on 0800 096 7447
“Market Leading 2 Year Fixed Rate Interest Only”
£250 CASHBACK

Early redemption charges may apply. Overall Cost for Comparison 4.00% APRC. This is the cost of the mortgage over the full term.

 

Type
2 Year Fixed
Initial Interest Rate

 

1.58%

Reverts to 3.59%

 

Max LTV
70%
Product Fee
Yes
Interest Only
Call NatWest FREE on 0800 158 2934
“Market Leading 2 Year Fixed Rate Interest Only”
£250 CASHBACK

Early redemption charges may apply. Overall Cost for Comparison 4.00% APRC. This is the cost of the mortgage over the full term.

 

Type
2 Year Fixed Rate
Initial Interest Rate

 

1.58%

Reverts to 3.59%

Max LTV
75%
Product Fee
Yes
Interest Only
Call NatWest FREE on 0800 158 2934
“Market Leading 2 Year Fixed Rate Interest Only”
£250 CASHBACK

Early redemption charges may apply. Overall Cost for Comparison 4.00% APRC. This is the cost of the mortgage over the full term.

 

Residential – 5 Year Fixed Rates

Type
5 Year Fixed Rate
Initial Interest Rate

 

1.55%

Reverts to 3.59%

Max LTV
60%
Product Fee
Yes
Interest Only
Call NatWest FREE on 0800 158 2934
£250 CASHBACK

Early redemption charges may apply. Overall Cost for Comparison 3.30% APRC. This is the cost of the mortgage over the full term.

 

Type
5 Year Fixed Rate
Initial Interest Rate

 

1.84%

Reverts to 3.59%

Max LTV
75%
Product Fee
Yes
Interest Only
Call NatWest FREE on 0800 158 2934
£250 CASHBACK

Early redemption charges may apply. Overall Cost for Comparison 3.50% APRC. This is the cost of the mortgage over the full term.

 

Type
5 Year Fixed Rate
Initial Interest Rate

 

1.84%

Reverts to 3.59%

Max LTV
75%
Product Fee
Yes
Interest Only
Call RBS FREE on 0800 096 7447
£250 CASHBACK

Early redemption charges may apply. Overall Cost for Comparison 3.50% APRC. This is the cost of the mortgage over the full term.

 

Interest Only Mortgage – What Are The Income Requirements?

This will depend on the lender…

Some mortgage lenders have no minimum income requirement although they may cap what you can borrow on an interest only basis up to e.g. 65% LTV (Loan To Value). With the balance if you are borrowing more than this being on an interest & repayment of capital basis.

A number of lender who offer higher income multiples when it comes to borrowing e.g. 5 x income will require your salary to be over a set amount pa e.g. £70,000. Different lenders will also have different criteria regarding how you pay the mortgage back.

Some interest only mortgage lenders will accept sale of property; some will have conditions on this e.g. NatWest require you to have at least £200k of equity in your property at time of sale.

With some lenders it is possible to split your mortgage repayments on a interest only mortgage and a capital repayment mortgage basis.

This will reduce your mortgage balance over time, but at the end of the term there will still be an outstanding capital sum to repay. For advice on your interest only options click here

Using Sale of House as a Repayment Strategy

Lenders take different approaches to sale of house as a exit strategy for paying off a mortgage. For many people downsizing to a smaller home later in life is a logical step and often it will be to a part of the country where house prices are lower.

Some lenders will want to know where you intend to downsize to so they can assess the valuation of properties and ensure you plan is plausible.

Affordability

A key consideration for lenders is affordability when they lend. In assessing whether an interest only mortgage is right for you income criteria will come into play.



Typically lenders will want to see an individual with an income of at least £50,000 or a household income of £75,000 to lend on a interest only basis. This criteria will vary so speak to a broker such as ourselves will help you get the right deal for your circumstances.


Why do people Choose an interest only mortgage?

The main reason is to keep monthly costs to a minimum. 

1. Has your initial mortgage deal come to an end?

By switching to a better deal with a different mortgage provider, an interest only mortgage could potentially allow you to benefit from lower interest rates and lower monthly mortgage repayments.

2. Are you looking to raise money?

By remortgaging you may be able to releasing equity in your home.

People often remortgage to provide money for:

  • Home improvements
  • New Kitchen
  • New En-suite bathroom
  • Consolidate other existing debts.

3. Borrowing in retirement interest only

For older borrowers an option that could be right for you is a retirement interest only mortgage (RIO). The main differences of this type of mortgage to a standard mortgage is:

  • There is no end date to the mortgage – so its usually only paid off when you die or move into long term care or where the house is sold
  • Mortgage affordability is based on the income of the lowest earner

Retirement interest only mortgages are for older borrowers who might find them easier to qualify for than a standard interest only mortgage.

If this is something you are looking to complete our enquiry form for more details.

For more on interest only mortgages see our mortgage section.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Written by Editorial Team ,
4th July 2020