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BLOG articles: Quick Guide: Mortgage Affordability
With an interest only mortgage, you are only paying the interest charged on the loan each month and the capital has to be repaid in full at the end of the term, from other arrangements that you have made. It is essential that there is a realistic plan in place that will allow the capital to be repaid. Lenders are much stricter about interest only lending now, so why not get some expert help and advice from Maxwell Moore?
- If your plan is to sell the property to pay off the mortgage then lenders will generally only consider low loan to value (LTV) applications on an interest only basis. This means the amount you want to borrow will normally need to be 50% or less than the value of the property.
- If you have a different plan for paying off the mortgage then it may be possible to obtain an interest only mortgage up to 75% LTV.
- Most lenders have a minimum income requirement for interest only applications which is usually in excess of £50,000 a year.
- There will usually be a minimum equity requirement as well, typically £150,000 or higher. This means the property needs to be worth at least the minimum equity plus the mortgage amount at the end of the mortgage term.
If you are coming to the end of the term on an existing interest only mortgage and have not got the means to fully repay at the present time, then do talk to us. We will work with you to try and find a solution, and we have access to lenders who deal with this type of scenario. The above considerations may not necessarily apply in this scenario.
Retirement Interest Only
There are new products available specifically targeted at older borrowers that allow them to continue on an interest only basis and stay in their home. You can find out more on our Older Borrowers page.