Interest-Only Mortgages on the Rise?
2 minute read
In recent weeks, a number of lenders have returned to the interest-only mortgage market. These types of loans had heavily reduced in their availability by the end of 2012, after mortgage rules were tightened. This follows alternative reports in the month of September, which suggested that the number of outstanding interest-only mortgages were falling. With many lenders now offering interest-only in some form, the opinions surrounding such offers have been re-evaluated. They can now be viewed as a viable solution for the right borrower with a carefully formulated repayment strategy in place. Some examples of where interest only mortgages might suit. 1. Sales staff who work on commission structures 2. People who earn large irregular bonuses, and may want to pay back the capital once the money is available 3. Landlords who would like to take an income from their property but will eventually sell it to clear the loan If a sensible plan is in place, then this loan structure can work to great effect.
The Expert’s View
Interest only has been an area of the market under close scrutiny since the credit crunch, and perhaps some lenders have been seen to take the easy route of simply no longer offering this facility rather than consider each individual borrower’s needs. It is still an area that requires specific considerations to risk and the borrower’s ability to repay the loan over the required term. It should not be seen as simply a way of reducing a borrower’s monthly expenditure where future considerations have not been factored in. It is perhaps still the elephant in the room where lenders and certain borrowers alike know that some loans are at risk of not being able to be repaid but, some lenders are now taking a more logical approach albeit still limiting their availability. A good adviser should be fully assessing a client’s circumstances and highlight the pros and cons of an interest only over a repayment mortgage before the mortgage is arranged however, with interest only loans being taken out for the right reasons they are a valid and very useful method of repaying mortgages for some. To discuss your mortgage requirements with the Just Mortgage Brokers team, either call us on 0800 114 3575 or use our contact form.