In recent years, interest only mortgages haven’t been offered on a regular basis, but they still exist. There are some lenders who in the right circumstances would offer an interest only mortgage to applicants and there are still many homeowners who still hold an interest only mortgage from the era when these mortgages were more readily available.
Interest only mortgages were very popular for a spell
This style of mortgage was common at the start of the millennium and it is believed that close to two million borrowers in the United Kingdom still hold an interest only mortgage. This is a significant amount of people, and given that this style of mortgage is still prominent in the market place, there is possibly an argument to suggest it should be offered to more mortgage applicants.
While the lower monthly payments would be of great benefit to many applicants, there are concerns over the homeowners ability to pay off the loan. In theory, at the end of the mortgage period, the homeowner would sell their home, pay off the loan and ideally, have profit to enjoy.
However, there is no guarantee in the property market, and the risks associated with interest only mortgages is why so few lenders are keen to offer them. There is a fear that many homeowners would find themselves with negative equity, and this could place them in serious financial trouble.
Interest only mortgages may appear for the retired market
There does appear to be a movement towards offering interest only mortgages for people of retirement age. This has been led by the Financial Conduct Authority, the FCA, who have started a consultation to see if this would be of benefit. This style of mortgage would work with the borrowers paying interest in their property without making any payments on their loan. This mortgage would continue until the property owner passed away or they moved into a care facility. This style of loan would be of benefit in that the amount paid each month would be lower, but it wouldn’t assist with paying off the mortgage. There would be concerns as to how the property would be paid off if the value of the home dropped below the amount that was outstanding. If you are looking for advice or guidance when it comes to mortgages, make sure you speak to Austin Property Services. We are on hand to ensure you receive the help you need with whatever move you make next.