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When you're looking for mortgage advice, it can be difficult to find the information you need. An interest-only mortgage is a type of home loan where your monthly repayments only cover the interest on the loan. This means that you'll never pay off any of the money you've borrowed, and at the end of the mortgage term, you'll need to find a way to repay the full amount.
Interest-only mortgages are often used for buy-to-let properties, or for people who are self-employed or have an irregular income. They can also be a good option if you're looking to keep your monthly payments down.
If you're thinking about taking out an interest-only mortgage, make sure you get advice from a qualified mortgage advisor. They'll be able to help you understand the risks and make sure that an interest-only mortgage is the right option for you.
At Echo Finance, we've helped countless people find the right mortgage for their needs. We're a whole of market broker, which means we can compare thousands of mortgage deals from a wide range of lenders. We'll find the right deal for you, and we'll also give you access to our team of expert mortgage advisors.
If you're looking for mortgage advice, get in touch with Echo Finance today. We'll be happy to help you find the right mortgage for your needs.
How do interest-only mortgages work?
With an interest-only mortgage, you only pay the interest on your loan each month. This means that your monthly payments will be lower than with a repayment mortgage, where you repay both the interest and some of the money you've borrowed.
At the end of the mortgage term, you'll need to find a way to repay the full amount that you've borrowed. This can be
At the end of your mortgage term, you'll need to find a way to repay the full amount that you've borrowed. This is usually done by selling the property, or by using savings or investments.
How are interest-only mortgages different to repayment mortgages?
With an interest-only mortgage, you only pay the interest on your loan each month. This means that your monthly repayments will be lower, but at the end of your mortgage term, you'll still owe the full amount you've borrowed.
With a repayment mortgage, you'll repay both the interest and some of the money you've borrowed each month. This means that your monthly payments will be higher than with an interest-only mortgage, but at the end of your mortgage term, you'll have paid off the full amount.
Repayment mortgages are the most common type of mortgage in the UK, but interest-only mortgages can be a good option if you're looking to keep your monthly repayments down.
What happens at the end of the term with an interest-only mortgage?
At the end of your mortgage term, you'll need to find a way to repay the full amount that you've borrowed. This is usually done by selling your property, or by taking out a further mortgage. Your repayment strategy could include:
- Savings
- Selling investments
- Drawing from your pension
- Selling the property
- Remortgaging
If you don't have enough equity in your property, you may not be able to sell it for enough to repay the outstanding amount on your mortgage. In this case, you'll need to find another way to repay the money you owe, which could mean using savings or investments.
If you're not sure how you'll repay your mortgage at the end of the term, speak to a qualified mortgage advisor. They'll be able to discuss your options with you and help you find a solution that works for you.
What are the risks of an interest-only mortgage?
There are a few risks to be aware of with an interest-only mortgage. Firstly, your monthly payments will only cover the interest on your loan, which means that you'll never pay off any of the money you've borrowed. This means that you could still end up owing a lot of money at the end of your mortgage term. This is different to a capital repayment mortgage, where your monthly payments will gradually reduce the amount you owe.
Secondly, your property could still be repossessed if you don't keep up with your repayments. This is true of all loans secured on your home, not just interest-only mortgages.
Thirdly, if your property doesn't increase in value as much as you expected, you may not have enough equity to sell it and repay your mortgage. This could mean that you'll need to find another way to repay the money you owe, which could be difficult if you don't have savings or investments.
Finally, if interest rates rise, your monthly payments could become unaffordable. This could put your home at risk if you can't keep up with your payments.
If you're considering an interest-only mortgage, make sure you understand the risks before you commit to anything. Speak to a mortgage advisor to get more information.
How much can I borrow with an interest-only mortgage?
The amount you can borrow with an interest-only mortgage will depend on a number of factors, including your income, your monthly outgoings, and the value of your property.
To get an idea of how much you could borrow, use our mortgage calculator. This will give you an estimate of how much you could borrow, based on your personal circumstances.
Remember, this is just a guide – the actual amount you could borrow may be different. To get an accurate figure, speak to a qualified mortgage advisor. They'll be able to give you a more accurate estimate, based on your specific circumstances.
What are the benefits of an interest-only mortgage?
There are a few benefits to be aware of with interest-only mortgages. Firstly, your monthly payments will be lower than with a repayment mortgage. This means that you could potentially afford a more expensive property.
Secondly, if your property increases in value, you'll have built up equity which can be used to repay the mortgage at the end of the term, and make a profit.
If you're considering an interest-only mortgage, make sure you understand the benefits and risks before you commit to anything. Speak to a mortgage advisor to get more information.
Is an interest-only mortgage right for me?
Interest-only mortgages are not right for everyone. They suit some people, but not others. You need to consider your personal circumstances and decide if an interest-only mortgage is the right option for you.
Here are some things to think about:
- Do you have a repayment strategy in place?
- Are you comfortable with the risks involved?
- Can you afford the monthly payments?
- Do you have a good credit history?
If you're not sure if an interest-only mortgage is right for you, get in touch with one of our team. We can help you understand your options and find the right mortgage for your needs.
Do all lenders offer interest-only mortgages?
No, not all mortgage lenders offer interest-only mortgages. And if they do, they may only offer a repayment option for a certain percentage of the loan.
If you're interested in an interest-only mortgage, speak to one of our team at Echo Finance. Our experienced mortgage brokers can help you understand your options and find the right mortgage for your needs. We work with 90+ lenders, so we can find the right mortgage for you, whether it's an interest-only deal or a repayment mortgage.
Get in touch
If you're considering an interest-only mortgage, get in touch with one of our team. We can help you understand your options and find the right mortgage for your needs.
You can call us on 0800 0934 914 or fill in our online enquiry form and we'll get back to you as soon as possible.
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Frequently Asked Questions
Below you will find the answers to the questions we hear most often from Echo Finance customers:
A mortgage broker, or a mortgage advisor, is an intermediary who acts as a conduit between an aspiring borrower and a lender. It is their job to provide the mortgage applicant with impartial advice, help them choose the right product and arrange the deal with the lender.
Brokers provide services including advice on which type of mortgage to choose, providing access to exclusive rates through their lender contacts, and application support. Some can offer advice on all areas of the mortgage market, while others specialise in niche fields such as buy-to-let, bad credit, commercial finance, first-time buyers or self-employed borrowers.
People choose to apply for their mortgage through a broker because it can boost their chances of finding the right deal, while saving time and money in the long run.
- Residential mortgages: Everything from fixed-rate to tracker mortgages for first-time buyers, homemovers and remortgage borrowers
- Specialist mortgages: For borrowers who fall outside of standard lending criteria, including people with bad credit, self-employed professionals and more
- Later-life lending: Including advice on equity release, mortgages for pensioners and retirement interest only (RIO) mortgages
- Bridging & Commercial: We have specialist advisors on hand for commercial mortgages, bridging loans, development finance and more
- Insurance & Protection: Including life, home and critical illness cover for families and individuals, as well as landlord and business protection insurance
Echo Finance is regulated by the Financial Conduct Authority and is reviewed annually by an independent compliance company. All of our brokers and advisers hold industry-standard qualifications, such as CeMAP, CeRER and DipMap, where required.
We are committed to providing advice through the channels that best suit your needs. Our brokers can provide advice via phone, email, video and web chat from anywhere in the UK, but we also aim to offer face-to-face appointments for those who request them.
