Can you sell a house on interest-only mortgage?

2020-02-13 by No Comments

Can you sell a house on interest-only mortgage?

Benefits of interest-only If you are buying to let, an interest only mortgage can be more convenient, as it keeps your overheads lower, and when the term expires you can just sell the property to repay the loan.

What does it mean to pay interest only?

At its most basic, an interest-only mortgage is one where you only make interest payments for the first several years—typically five or 10—and once that period ends, you begin to pay both principal and interest.

What does paying interest-only mortgage mean?

With an interest-only mortgage your monthly payments only cover the interest on the amount you borrowed. This means it’s important you have a plan for how to pay off the capital (the amount you have borrowed) and understand your options.

What happens if I can’t repay my interest-only mortgage?

Many landlords pay their mortgages on an interest-only basis and lenders generally accept this. Either way, if you can’t repay the amount you borrow at the end of the term you’ll need to take out a new mortgage or sell the property to pay off your mortgage.

What are the benefits of an interest only mortgage?

The advantages of interest only mortgages are:

  • Lower monthly payments because they only cover the interest.
  • More flexibility to choose where your money goes. You can decide how you will save to pay back the mortgage balance or use some towards home improvements.
  • You could make a profit if your investments perform well.

How long can you do interest only mortgage?

Interest-only periods usually last between three and five years. Some lenders offer interest-only periods of up to 10 to 15 years, but this may be restricted to investors. You may be able to negotiate the length of the interest-only period with your lender, depending on your personal circumstances.

What is the criteria for an interest-only mortgage?

To get an interest-only mortgage, most lenders want you to have an LTV ratio of 75% or lower, some will go up to 80% and a few will go to 85% which means you must put down a deposit of 15%.

Why would you do an interest-only mortgage?

Interest-only mortgages can be appropriate for borrowers who are disciplined enough to make periodic principal payments as well. They might also work for someone with a job that pays large annual bonuses that can be used to pay down the principal balance of the loan each year.

Can I get an interest-only mortgage at 60?

While there’s no minimum age requirement, retirement interest-only mortgages are generally aimed at older borrowers, such as the over 55s, over 60s and pensioners who might find them easier to qualify for than a typical interest-only mortgage.