Interest only mortgages got a bit of a bad name when the 2008 financial crisis led to revelations that many people would not be able to repay their loan. This does not necessarily mean that it may not be the right choice for you, however, and the popularity of this sort of product is actually rising once again.
Your IFA may have the best financial advisor software available and the most in-depth knowledge available and you may have a firm idea of what you want from a mortgage but there may come a time when you need to broaden your mortgage search to find the right product for you. Maybe surprisingly, you could find that this comes in the form of an interest only mortgage.
What is an interest only mortgage?
This is a plan which requires you to pay back the interest each month and so at the end of the term you will need to pay back the original loan amount minus the interest already paid. If you have this type of mortgage and you are experiencing difficulties then you may want to look at https://www.gov.uk/support-for-mortgage-interest.
There is a misconception that interest only mortgages are no longer available. This is not the case, although the lending criteria are much more stringent, as your financial advisor might advise. It may pay to book an appointment with an IFA to help you with this decision. You may choose to find one using state-of-the-art software assistance such as
https://www.intelliflo.com/financial-adviser-software in order to make this as easy as possible.
Why might you choose an interest only mortgage?
If you have clear financial plans, then an interest only mortgage may be a good choice. If you are what might be termed as ‘cash poor but asset rich’ then this might be the choice for you.
There is also a fairly new product, namely an interest only mortgage with a retirement focus. This may be a good choice if you don’t want to pass on an inheritance property to family or friends.
Understanding repayment plans
If you choose an interest only mortgage you will need a repayment strategy and different lenders have different requirements. You may also need to have a ‘business plan’ in order to demonstrate your eligibility. Your repayment plan may include property that you will inherit in the future.