Interest Only Mortgage
- This is typically a BTL mortgage (although BTL can include capital repayment too).
- The borrower pays interest throughout the term of the loan - traditionally 25 years.
- A retired person taking out a loan would unlikely be granted 25 years to pay unless his life expectancy is likely to outlive the loan.
- This is in contrast to a direct repayment mortgage where the borrower pays both interest and capital.
- A slow start mortgage is a compromise between the above two mortgage products.
- One in 8 borrowers claim not to know that they have an interest- only mortgage. Either they lack understanding or mis-selling is widespread. Retired home owners throughout the UK are being refused extended mortgages due to their age and limited longevity to repay. This is not so common with BTL mortgages but the same phenomenon can face investors too. For more see articles on this topic.
Published: 8 November 2013
Last Updated: 17 November 2021