How Much Deposit Do I Need For An Interest-Only Mortgage? The ruggedness of interest-only eligibility criteria has waxed and waned for many decades, normally in response to economic circumstances and the state of the real estate market. It is because Interest-Only Mortgages were initially designed to be sold alongside investment policies that were ordered to look to settle the capital in total. Sadly, a lot of these policies and mortgages were arranged without due care or consideration to the
risks, which meant some borrowers found themselves not able to pay back the loan towards the conclusion of their term — a problem significantly compounded by the 2008 economic crash.
TIGHTENED CRITERIA It is no longer possible to bank on property price rises or endowment policies to pay for capital repayment which implies that interest-only mortgages are considered to be a riskier proposition for mortgage providers prompting many lenders to tighten up criteria around the credit crunch in 2008. This meant it was much tougher for consumers to get interestonly mortgages and some lenders no longer accepted the expectation of rising property prices as a valid repayment plan. To be approved, there are lots of more components to criteria that had to be met and your repayment plan had to be considered as a great deal more watertight.
RELAXING REGULATIONS Today rules, regulations, and criteria enclosing interest-only mortgages are relaxing marginally. In the latest months, some suppliers have raised the upper age limit for applicants, permitting people up to 70 years old to apply for an interest-only mortgage (though some lenders might still permit this over a longer-term based on individual circumstances). Other suppliers have also started to accept repayment plans based on the eventual sale of the property in many cases.
LOAN-TO-VALUE (LTV) REQUIREMENTS
Whilst a regular mortgage might enable you to put down a deposit as little as 5 percent, interest-only mortgages generally require you to have a far more substantial deposit. 50-60% loan to value (LTV) is a very common requirement, which implies your deposit/equity will have to cover 40-50percent of the value of the property before you proceed. Split repayment methods are also now an opportunity with a couple lenders providing marginally better extent in this area.
PROVING REPAYMENT PLANS Any candidate for Interest Only Mortgage Rates may also have to have a clear, concrete plan to settle the capital of their home towards the conclusion of the interest-only mortgage term. There are a number of circumstances that could make this possible, but you’ll need to provide clear evidence to verify that repayment is realistic. You might, as an example!
Be planning to market the property and downsize Be expecting to receive an inheritance Be planning to market the property and move in with relatives Be planning to market another asset (as an example, a buy to let property) Be expecting to relieve a significant bonus or an alternative windfall possessing a repayment plan between your pension stocks, shares, investment bonds or an alternative investment vehicle
Whatever your situations, age or repayment plan, searching the best value interest-only- mortgage means understanding the industry inside out. Contact our skilled full team today for an inside view and to uncover ideal products for you. Get in touch Read more: - Best Interest Only Home Loan Rate