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At least 55 lenders offering interest-only mortgages

Tags: Interest-only mortgages, Residential mortgages

Aug 12 2022

At least 55 banks and building societies provide interest-only mortgages to higher-earning applicants and borrowers with equity in their property. This figure does not include the private banks that consistently offer interest only.

Barclays, Halifax, HSBC and Metro Bank are some of the biggest banks providing interest-only mortgages. At the same time, smaller lenders like the Family Building Society and Principality Building Society regularly offer interest-only terms.

Aaron Strutt, product director at Trinity Financial, says: "Many borrowers automatically take full capital repayment mortgages even though they qualify for interest only or part interest-only.

"Interest-only provides people with payment flexibility which is very useful during a cost of living crisis. Borrowers can minimise their costs when they need to and make lump overpayments when they have more disposable cash."

If you plan to take an interest-only mortgage, it often makes sense to take an element of the mortgage on capital repayment, so some of the mortgage is repaid. You can also typically make lump some overpayments generally up to 10% of the loan amount, without charge.

Which lenders offer decent interest-only terms?

Santander for Intermediaries offers an attractive interest-only policy. Where any part of the mortgage is on interest only, and the combined gross income is less than £100,000, the maximum income multiple is 4.45 times income. Where any part of the mortgage is on an interest-only basis, the maximum loan-to-value for the overall lending is 85%.

Where at least one applicant has a gross income of more than £250,000, any lending over 75% loan-to-value must be on a capital and interest basis. For an applicant with gross income of £250,000 or less, any borrowing over 50% loan-to-value must be on a capital and interest basis.

Santander's policy also states when the sale of the mortgaged property is being used as an interest-only repayment vehicle, applicants must have a minimum £250,000 equity in the property.

How will the lenders assess how much you can borrow on interest-only?

Trinity Financial's mortgage brokers work out maximum loan sizes using the lender's affordability calculators. Most lenders will assess affordability on a capital and interest basis rather than the reduced interest-only payments.

Call our experts on 020 7016 0790 to secure an interest-only mortgage or send an enquiry

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At least 55 lenders offering interest-only mortgages

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