Investing in property can be a great way to generate rental income. Buy to let mortgages in Beverley help landlords finance their investments. Whether you’re new to property investment or expanding your portfolio, understanding how these mortgages work is important.
A buy to let purchase means buying a property to rent it out instead of living in it. A buy to let mortgage in Beverley works differently from a standard residential mortgage. Lenders focus on the property’s rental income rather than just your personal earnings. They also ask for a larger deposit compared to residential mortgages.
Lenders set specific criteria for buy to let mortgages in Beverley. Most require you to own a home, either outright or with a mortgage. Some may accept first-time buyers, but the requirements are stricter. Your income and financial stability matter too. Most lenders prefer applicants earning above a certain amount. The rental income must usually cover 125–145% of the mortgage payments.
Applying for a buy to let mortgage in Beverley is similar to a standard mortgage. Lenders check your financial background and the property’s expected rental income. You’ll need to provide income details, credit history, and information about other properties you own. One of our mortgage advisors in Beverley can help find lenders that match your situation.
There are different types of buy to let mortgages in Beverley. Many landlords choose interest-only mortgages because they have lower monthly payments. The loan balance is repaid at the end of the term. Repayment mortgages gradually reduce the loan amount over time, so you own the property outright when the mortgage ends. You can also choose from fixed-rate, tracker, or variable-rate deals, which affect how your repayments change over time.
The amount you can borrow depends on your financial profile and rental income. Most lenders require rental income to cover 125–145% of the mortgage payments. Some may also check your personal income, especially if rental income alone doesn’t meet their criteria. Speaking with mortgage advisors can give you a clearer idea of how much you could borrow.
Yes, many landlords remortgage buy to let properties in Beverley to get better rates, release equity, or adjust their mortgage terms. If property values have risen, remortgaging may unlock better deals. To qualify, you’ll need to show that rental income still covers repayments and meets the lender’s affordability requirements.
Getting a buy to let mortgage in Beverley as a first-time buyer can be harder, but it’s possible. Some lenders accept first-time landlords but set stricter conditions. A larger deposit and strong financial background improve your chances. A mortgage advisor can help find lenders willing to work with first-time buyers.
Beverley attracts many visitors each year, making it a great location for a holiday let investment. If you’re thinking about buying a property to rent out on a short-term basis, understanding how buy to let mortgages in Beverley work for holiday lets is essential.
A holiday let mortgage allows you to purchase a property that you can rent out to different guests throughout the year.
Unlike a standard buy to let mortgage in Beverley, which applies to long-term rentals, this type of mortgage is designed for short-term stays. Lenders assess applications based on projected seasonal income and occupancy rates, rather than a fixed monthly rent.
Lenders consider several factors when assessing eligibility. They will check your credit history, financial background, and income to ensure you can manage repayments. The property itself also needs to meet specific requirements, including its ability to generate enough rental income throughout the year.
Many lenders ask for a larger deposit than standard buy to let mortgages. While some accept as little as 25%, others may require 30% or more. They also assess affordability by looking at both your expected rental income and your personal financial situation.
A holiday let can generate strong returns, especially in a sought-after location like Beverley. Short-term lets often produce higher rental yields than traditional long-term tenancies, as you can adjust pricing based on demand.
Tax benefits also make holiday lets attractive. Furnished holiday lets can qualify for mortgage interest relief and capital allowances on furnishings, which aren’t available for standard buy to let properties.
That said, managing a holiday let requires more involvement, including marketing the property, handling guest bookings, and maintaining the home.
While both mortgage types allow you to earn rental income, they have key differences. A standard buy to let mortgage in Beverley requires a tenancy agreement of six months or longer, ensuring a steady rental income. In contrast, a holiday let mortgage is assessed based on seasonal earnings, which can fluctuate throughout the year.
Lenders also view the risks differently. A conventional buy to let mortgage prioritises long-term rental stability, whereas a holiday let mortgage must account for periods of vacancy. As a result, lenders often require a higher deposit and may charge higher interest rates.
If you’re considering a holiday let in Beverley, finding the right mortgage is key. Our mortgage advisors in Beverley can guide you through the options and help you secure the best deal for your investment.
If you’re investing in buy-to-let mortgage in Beverley, you might be wondering whether it makes sense to hold your properties under a limited company rather than in your personal name.
In recent years, more landlords have been exploring this route, particularly due to changes in tax regulations. But is it the right move for you?
Instead of purchasing a buy-to-let property as an individual, you can buy it through a limited company, often set up as a Special Purpose Vehicle (SPV). This type of company is specifically created to hold and manage buy-to-let properties.
A key reason landlords consider this option is the way profits are taxed. When you own a property personally, rental income is subject to income tax, which can be significant if you’re in a higher tax bracket.
The limited company, on the other hand, pays corporation tax, which is often lower than the higher rate of income tax. This can make a substantial difference to the profitability of your investment.
If you’re purchasing a new buy-to-let property, setting up an SPV could be worth considering. Lenders typically prefer lending to SPVs rather than trading companies because they are specifically used for property investment. This can sometimes make it easier to secure a buy to let mortgage in Beverley.
That said, mortgage rates for limited companies are often slightly higher than those for individual landlords. The application process can also be more complex, and not all lenders offer limited company buy-to-let mortgages. Working with experienced mortgage advisors can help you find the best options available.
Holding property within a limited company comes with both advantages and potential downsides.
One of the main benefits is tax efficiency. Limited companies can deduct mortgage interest as an expense, which individual landlords can no longer do in full. There’s also the option to retain profits within the company, which can be useful for reinvesting in further properties.
On the other hand, there are additional costs to consider. Running a limited company involves administrative expenses, including accountancy fees and reporting requirements. There may also be higher mortgage interest rates, and withdrawing money from the company as dividends could result in extra tax liabilities.
If you already own buy-to-let properties in your personal name, transferring them into a limited company isn’t as straightforward as it might seem. This isn’t a simple switch, legally, it counts as selling the property to the company, which means you could face capital gains tax on any increase in value.
Additionally, your company would need to repurchase the property, potentially triggering stamp duty and legal costs.
Before making a decision, it’s worth considering whether the tax benefits outweigh the costs of transferring ownership. Some landlords find that keeping existing properties in their name while purchasing new ones through an SPV provides a balanced approach.
Whether you’re buying a buy-to-let property through a limited company or as an individual, finding the right mortgage is key. If you’re looking for buy to let mortgages in Beverley, speaking to knowledgeable mortgage advisors can help you navigate the process and explore the best deals available.
If you’re thinking about renting out your home in Beverley, you may need to switch from a residential mortgage to a buy to let. This is common if you’re moving elsewhere, investing in property, or looking for extra income.
To switch to a buy to let mortgage in Beverley, you must speak to your lender. Some may offer consent to let, which allows you to rent out your home temporarily while keeping your current mortgage. This is usually for a set period, and you may face additional fees or higher interest rates.
If you need a long-term solution, remortgaging to a buy to let product is the best option. Lenders will check your financial situation and expected rental income. If your current lender does not offer buy to let mortgages or has strict requirements, moving to a different provider may give you better terms.
Buy to let mortgages often have higher interest rates than residential mortgages, and lenders typically require a larger deposit. It’s important to compare options to find the most suitable deal.
Lenders assess several factors before approving a switch to a buy to let mortgage. One key requirement is that the expected rental income must exceed the mortgage payments, usually by at least 125% to 145%, depending on the lender’s criteria. This ensures the rental income covers the mortgage, even if interest rates rise.
Most lenders also require a minimum personal income, typically around £25,000 per year, to ensure you can manage any financial shortfalls. They will also check your credit history, existing mortgage balance, and overall affordability.
Equity in the property is another factor. Many lenders require at least 25% equity or a 25% deposit if you are remortgaging. The more equity you have, the better the mortgage deals available.
A buy to let mortgage in Beverley is designed for rental properties. If you take out this type of mortgage, you cannot live in the home yourself. Lenders set this rule because buy to let mortgages follow different risk assessments and affordability checks.
If your circumstances change and you need to move back into the property, you must switch to a residential mortgage. Continuing to live in a property with a buy to let mortgage without informing the lender could break your mortgage terms.
If you’re unsure about your future plans, a consent to let agreement might be a better option. This allows you to rent out your home for a short period without committing to a full buy to let mortgage.
There is no strict limit on how many buy to let mortgages you can hold, but lenders will assess your overall financial position. If you own multiple rental properties, some lenders may view you as a portfolio landlord, which means different lending criteria may apply.
Lenders consider factors such as rental income, outstanding mortgages, and your ability to manage multiple properties. Some offer specialist buy to let products for landlords with multiple properties, which may have different affordability checks.
If you’re considering changing your mortgage to buy to let in Beverley, finding the right lender and mortgage deal is key. Our mortgage advisors in Beverley can help you explore your options, ensuring you meet lender requirements and secure the best possible terms.
A buy to let mortgage allows you to purchase a property to rent out rather than live in. If you’re considering an investment property, buy to let mortgages in Beverley could be an option.
Lenders assess applications based on the expected rental income, not just personal earnings. Because these mortgages are designed for investment purposes, they often require a larger deposit, usually at least 25% of the property’s value.
Interest rates also tend to be higher than those for a residential mortgage.
Buy to let mortgages in Beverley work similarly to standard home loans but have key differences. Most lenders require at least a 25% deposit, though some accept less.
Many landlords choose an interest-only mortgage, meaning they only pay the interest each month and settle the full loan balance at the end of the term. Lenders calculate borrowing limits based on expected rental income.
Most require the rent to cover at least 125% to 145% of the mortgage payment. Some also check personal income to ensure the mortgage remains affordable if the property sits empty.
If you’re exploring buy to let mortgages in Beverley, the amount you can borrow depends on rental income and, in some cases, your personal finances. Most lenders want the rental income to cover 125% to 145% of the mortgage payment.
Some also set a minimum personal income requirement, often around £25,000 per year. One of our mortgage advisors in Beverley can help you understand how much you could borrow based on Beverley’s current rental market.
Most lenders expect you to be at least 21 years old, own a home, and have a good credit history. Some require a minimum annual income, while others only consider rental income.
Although previous landlord experience helps, many lenders still approve first-time landlords. The best mortgage for you will depend on your financial situation and investment plans.
Buy to let mortgages in Beverley are for those buying a property specifically to rent out. A let to buy mortgage, however, allows homeowners to remortgage their existing property so they can rent it out while purchasing a new home to live in.
This can be useful if you want to move but prefer to keep your current home as an investment rather than selling it. Each mortgage type has different lending criteria, so it’s important to choose the right one for your situation.
There is no strict limit on how many buy to let mortgages in Beverley you can have, but each lender has different rules. Some specialise in landlords with multiple properties, while others limit how many they will approve.
The number of mortgages you can secure depends on your rental income, existing borrowing, and overall financial position. If you’re building a property portfolio, a specialist mortgage broker in Beverley, such as ourselves can help you find lenders that support portfolio landlords.
No, buy to let mortgages in Beverley are strictly for rental properties. Living in a property with a buy to let mortgage would breach the terms of the loan. If your circumstances change and you want to move into the property, you’ll need to switch to a residential mortgage.
Before approving this change, the lender will reassess your finances to ensure you meet residential mortgage criteria.
Embarking on a mortgage journey can feel overwhelming, especially for first time buyers in Beverley or those looking to move or invest in property. With numerous options available, it’s crucial to make informed decisions from the start to save time and costs down the line.
At our company, we offer a personalised and friendly service, catering to your specific mortgage needs. We understand the complexities of the process and have the expertise to guide you through it. Our team is dedicated to providing expert mortgage advice in Beverley, assisting both new and existing customers.
In this article, we’ve compiled a comprehensive overview of the advantages and disadvantages of working with a mortgage broker in Beverley. Discover why many people trust us for their mortgage advice needs in Beverley and benefit from our knowledge and guidance.
While some believe that finding a mortgage deal on their own will save them money, the reality is more nuanced, especially when it comes to a mortgage broker in Beverley. While brokers may charge a fee, the actual cost depends on individual circumstances and the chosen company.
If you have extensive knowledge and a straightforward case, going direct might be easier and more cost-effective. For more complex situations or if you lack knowledge in the mortgage market, seeking the assistance of a mortgage broker in Beverley can prove invaluable.
Without proper knowledge, you run the risk of choosing the wrong deal or facing a rejected mortgage application. Both scenarios can lead to increased expenses or negatively impact your credit score, affecting future mortgage prospects.
With a dedicated mortgage advisor in Beverley, their primary goal is to help you achieve your mortgage goals. They strive to provide the right recommendation the first time, at the best price. While there may be a service fee involved, the potential savings in the long run can outweigh the costs.
In the past, many customers preferred approaching their banks directly out of loyalty and familiarity with the traditional way of conducting the mortgage process.
Back then, customers would visit their local branch and often interact with the same bank manager, benefiting from their expertise and personal knowledge of their financial situation.
Previously, having the bank manager personally review and approve your mortgage application was seen as advantageous, as they possessed a deep understanding of your finances.
With the advent of technology and online banking, the mortgage process has undergone significant changes, particularly with the introduction of digital credit scoring.
Nowadays, the bank manager does not manually assess each case. Instead, a sophisticated online system evaluates your eligibility for a mortgage. This process is standardised and applies uniformly across banks, ensuring fairness regardless of the institution you choose.
The focus has shifted from personal interactions to digital assessments based on objective criteria.
While it’s true that going directly to a lender can offer access to exclusive deals, it’s important to note that these options may be limited to that particular company. Banks typically provide their best deals, but they may not consider other lenders’ offerings.
It’s worth considering that mortgage lenders extend beyond banks, and there are numerous alternative options available. The deal a bank recommends may not necessarily be the most competitive one among all available lenders.
Seeking specialist mortgage advice in Beverley can provide you with a significant advantage. Our expert mortgage advisors in Beverley will thoroughly review your case and leverage our extensive panel of lenders to find the best deal tailored to your specific needs.
Another benefit of consulting a mortgage broker in Beverley is access to exclusive deals that are not available elsewhere.
Whether you’re a first time buyer, moving home, or looking to remortgage in Beverley, we can present you with a wide range of options to choose from, ensuring you find the most suitable mortgage solution.
In the aftermath of the 2007-08 credit crunch, significant improvements were made in the mortgage market. One of these changes came in the form of the 2014 Mortgage Market Review, which required lenders to provide mortgages only with extensive expert advice.
Gone are the days when anyone at a bank could grant a mortgage without proper checks or qualifications. The new regulations ensure that customers receive appropriate advice tailored to their circumstances.
These changes also introduced consumer protection measures that were previously lacking. If you believe you have been misadvised, you now have the option to file a complaint with the Financial Ombudsman or seek compensation through the Financial Services Compensation Scheme.
This increased consumer protection provides reassurance to customers, ensuring they receive reliable advice and guidance throughout their mortgage journey. This applies not only to mortgage brokers in Beverley but also to mortgage lenders, as both are subject to these regulatory requirements.
Choosing to approach a bank instead of a mortgage broker in Beverley can come with a drawback in terms of timing. Getting in touch with someone at a bank can often take months, and once the process begins, you may not receive frequent updates throughout your mortgage journey.
At Beverleymoneyman, we prioritise responsiveness and convenience for our customers. Our dedicated team of mortgage advisors in Beverley will reach out to you at a time that suits your schedule.
We’re available from early morning to late evening, seven days a week, including weekends and even some bank holidays.
We understand that every customer has a unique lifestyle, which is why our advisors are available throughout the day. You can easily book an appointment beyond traditional 9-5 hours or on weekends through our simple online booking system.
Our commitment to responsiveness doesn’t end there. Whether you’re at the beginning or nearing the completion of your mortgage, our friendly team will keep you informed every step of the way. If there are any changes, your dedicated mortgage advisor in Beverley will promptly get in touch with you.
It’s this emphasis on high-quality service that has made local mortgage brokers in Beverley like us a preferred choice for many. Instead of national banks, more and more people are opting to approach knowledgeable local experts who provide personalised support and guidance.
With our extensive industry experience, we have encountered various scenarios that can present slightly more challenges than the usual mortgage cases.
One such scenario is a mixed deposit, where two different sources of funds, such as a gifted deposit and personal savings, need to be audited and accounted for. Additionally, individuals on zero hour contracts pose considerations regarding the consistency of their income.
For those looking to make a second property purchase, assessing their affordability and financial capability becomes crucial. Self employed individuals in Beverley without a fixed income also face challenges in securing a mortgage.
A poor credit history can also impact an applicant’s eligibility, as lenders may view it unfavourably. Ultimately, affordability is a key factor, determining if applicants can comfortably manage the mortgage.
In the past, mortgage lenders competed primarily by offering better deals, but the focus has now shifted to meeting specific criteria. It’s important to note that while you may find a cheaper deal, it may not align with your unique circumstances and requirements.
Applying for a mortgage involves a hard search, which leaves a footprint on your credit file. Declining a deal in principle can negatively impact your credit file without clear reasons provided, adding to the frustration.
At Beverleymoneyman, we understand the intricacies of these situations and have the expertise to guide you through them. Our mortgage advisors in Beverley will leverage their knowledge and experience to help you find suitable mortgage options, even in challenging circumstances.
We are committed to providing personalised advice and support throughout the application process, ensuring you have the best chance of securing the right mortgage for your needs.
Mortgage brokers in Beverley play a vital role in helping you navigate the mortgage application process and increase your chances of approval. With their extensive network of lenders, they have access to a wide range of options and can find the most suitable deal that aligns with your specific criteria.
Once they have assessed your case, they can initiate the process of securing an agreement in principle for you. At Beverleymoneyman, we prioritise efficiency and aim to provide you with an agreement in principle within 24 hours of your free mortgage appointment.
It’s important to note that an agreement in principle does not guarantee or automatically commit you to a mortgage. It offers the advantage of having an expert review your credit file in advance, which can help protect your credit score.
Our team of dedicated mortgage advisors in Beverley is committed to getting our recommendation right the first time, ensuring that you have the best chance of a successful mortgage application.
When it comes to finding the right mortgage solution, there are advantages and disadvantages to both approaching a mortgage broker in Beverley and going directly to lenders. The choice ultimately depends on the speed and level of security you desire.
At Beverleymoneyman, we are a dedicated mortgage broker in Beverley with extensive experience assisting clients at various stages of their mortgage journey.
Whether you’re a first time buyer in Beverley taking your initial steps into the mortgage world, nearing the end of your fixed period, or looking to remortgage in Beverley, our team is here to provide expert guidance.
You can easily book a free mortgage appointment or remortgage review to speak with our knowledgeable mortgage advisors in Beverley. We understand the importance of flexibility and strive to accommodate your availability, subject to our schedule.
To gain further insight into our services, we encourage you to explore the exceptional customer reviews we have received.
These testimonials reflect the high level of service we consistently provide to our satisfied clients. Additionally, you can find valuable mortgage-related content on our YouTube channel, MoneymanTV.
When it comes to your mortgage goals, our team is dedicated to helping you find the right solution. Contact us today to discover how we can help you on your mortgage journey.
If your current mortgage deal is coming to an end, you might be wondering what your next steps should be. Many homeowners in Beverley choose to remortgage to secure a better deal, release equity, or adjust their mortgage terms.
Whether you’re looking to reduce your monthly payments, fund home improvements, or consolidate debts, remortgaging could be the right move.
As a mortgage broker in Beverley, we’ve helped countless homeowners explore their options, ensuring they find the most suitable mortgage for their needs.
A remortgage is when you take out a new mortgage to replace your existing one, often with a different lender. This can help you access better interest rates, release equity, or make changes to your mortgage terms.
Many homeowners look into remortgaging as their fixed-rate deal comes to an end. If you don’t switch, your lender will usually move you onto their Standard Variable Rate (SVR), which can be much higher than your previous rate. This often leads to increased monthly payments, making a remortgage a smart way to save money.
Most mortgage deals last between two and five years. Once your fixed term ends, your lender will place you on their SVR, which can fluctuate and often costs more.
By remortgaging, you can lock in a better interest rate, reducing your monthly payments and saving money in the long run. Many homeowners in Beverley remortgage for this reason alone, ensuring they continue to benefit from competitive rates.
If you’ve built up equity in your home, you could release some of it through a remortgage. This is a popular option for homeowners looking to:
Rather than moving to a new home, remortgaging for home improvements in Beverley allows you to make your current space work better for you. It can also increase your property’s value, which could benefit you if you decide to sell in the future.
Some homeowners choose to shorten their mortgage term, helping them pay off their mortgage faster. This often leads to higher monthly payments, but it can reduce the total interest paid over time.
Others opt to extend their term, lowering their monthly repayments and making them more manageable. The right choice depends on your financial situation and long-term goals.
For those with multiple debts, a remortgage in Beverley can help combine everything into one manageable monthly payment. This can be a useful way to regain control of your finances, but it’s important to consider the long-term impact.
Because mortgage terms are longer than personal loans, you may end up paying more interest overall. Speaking with a mortgage advisor can help you understand whether this is the right move.
Landlords often remortgage their buy-to-let properties to release equity for new investments. Whether you’re expanding your portfolio or improving an existing property, remortgaging can be a strategic way to fund future purchases.
If your fixed-rate deal is ending within the next six months, now is the time to start exploring your options. A mortgage advisor can help you secure a new deal before your current one expires, avoiding the risk of moving onto a higher SVR.
Even if you’re tied into your mortgage for longer, it’s worth checking if you could save money by switching early. Some lenders offer lower rates that could outweigh any early repayment charges.
A remortgage in Beverley can help you save money, improve your home, or adjust your mortgage to suit your lifestyle. With so many options available, getting expert advice can make all the difference.
Book a free remortgage review with one of our experienced mortgage advisors in Beverley today. We’re available seven days a week, making it easy to find a time that fits your schedule.
Our team will take the time to understand your needs and find the best remortgage deal for you. Get in touch today and see how we can help.
More and more people these days pay much closer attention to their credit rating, especially first time buyer in Beverley as they tend to worry about being accepted. Consumer awareness of credit scoring is higher now than ever before. We’d say at least half of the people who contact us for the first time, have already looked at their credit report online.
There are many different credit reference agencies out there. Most people will have heard of Experian or Equifax, but we recommend potential new clients to use Check My File for a 30-day free trial, which is £14.99 a month thereafter and can be cancelled at any time.
This is because of this report “sweeps” several of those reference agencies and collates the information into an easily understandable colour-coded report.
Try it FREE for 30 days, then £14.99 a month – cancel online anytime.
Often, clients ask if we will be doing a credit search on them, because they are aware that too many searches can have an adverse effect on their credit score. Lenders always run credit checks but we always seek a client’s permission before doing so. There are 2 different types of credit searches that Banks can run on a customer: hard searches or soft ones.
A hard credit search is an in-depth look at your credit report. Any financial institution carrying out one of these should seek your permission to do so. The advantage of a “hard” search is the lender is looking into your situation quite closely. If you pass the credit score then it’s fairly likely that your application will ultimately be successful. The only thing that can really go wrong from then on, is if for some reason you cannot provide satisfactory documentation to back up the information you have disclosed. Either that, or it turns out you have provided false details.
The bad news about a hard search though is that it leaves a “footprint” on your credit file. This means anyone who looks at your report in the future can see you have had a search carried out. This isn’t necessarily a bad thing, but if you have several footprints registered in a short period of time then it could look like you applying for lots of credit at the same time.
The footprint does not state whether your application was successful or not. However, if you have several searches over a few weeks, then lenders’ systems could wrongly assume you are being declined on the basis of; “Why else would you go to lender number 2 unless lender number 1 had said no?”.
The odd hard footprint on your record from time to time is no big deal. There’s no need to worry too much about this, just be careful not to have too many.
A soft credit search is a “lighter touch” look at your financial situation. This is the kind of search that would routinely be carried out on price comparison websites. This would give you an indication of what products might be available to you. It can also be useful if someone wants to verify your identity.
Some mortgage lenders do soft searches in the first instance. More and more lenders seem to be changing to doing this type of search. Whilst the financial institution doing a soft search obtains less information about you than if they had done a hard search, an agreement in principle from one of these lenders is usually still an extremely strong signal that your full application will be accepted.
You will be able to see that someone has carried out a soft search on you if you check your credit file. The good news though, is that these searches are not visible to other financial institutions like banks. This means that you can apply for an agreement in principle for a mortgage, without it damaging your credit score. This is irrespective of whether it is successful or not.
If you are wanting to make an offer on a property, we always think it is an excellent idea to have your mortgage agreement in principle in place prior to contacting the estate agent. You want to give yourselves the best possible chance of securing the property you want at the lowest price so if you can present yourselves as having your finances in place then you are definitely putting yourself in a stronger position. Having the agreement in principle also sometimes puts the agent off trying to “cross-sell” their own in-house mortgage services to you.
The Financial Conduct Authority does not regulate some types of buy to let or commercial mortgages.
Thousands of interest only mortgages are maturing every year and lots of mortgage-holders are not prepared to repay the capital sum owed. Here we examine how this situation has occurred and what can be done.
Interest only mortgages remain popular amongst buy to let applicants who buy up properties for extra income, but in the 80’s and 90’s most residential mortgages were set up this way. The idea was that you would only pay back the interest on the money you owed and you would pay back the capital lump sum at the end of the term.
When you took out an interest-only mortgage you may also have been advised to set up a repayment vehicle such as a low-cost endowment policy. The policy would then mature and was designed to repay the capital balance in full whilst also providing life cover through the term.
Unfortunately, many people weren’t made aware of the risks attached to these products, in particular, that there was no guarantee the policy would mature for a sufficient amount to repay the mortgage debt and this led to many applicants being compensated for being mis sold to.
It’s unlikely that you will have taken out an interest-only residential mortgage in the last few years as they are fairly difficult to get unless you can prove a robust strategy for paying back the capital. If you took out an interest-only mortgage in the late ’80s or ’90s and have not switched it to a capital repayment then it could be maturing soon and action needs to be taken.
If you have found yourself in this position it is highly likely that your mortgage lender will have been writing to you asking how you intend to repay the capital. It’s vital that you keep the line of communication fully open with them, they will not want to take your property into possession and will only do so as a last resort.
Here are some of the options you can consider:
The retirement mortgage market has become seemingly popular, largely due to the number of interest only mortgage reaching cessation with no repayment plan in place.
There are far more retirement products available these days and some providers let you service the interest element by way of regular monthly payments.
This means that when you die the capital balance is repaid from the house sale and the surplus passes to your family.
Interest only mortgage still have their place, for example, you may have a portfolio of properties or other investments in place to repay the money you have borrowed. Lenders will now want to examine your strategy for repaying the loan much more deeply than they did in the past to ensure they are not left with a mortgage on their books which could default.
They will want a big deposit to go down, possibly as much as 50%. They will also want to “sense-check” your plans, for example, will you have enough equity in your home to be able to down-size to a reasonable property at a later date.
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