Interest-only mortgages are something that many of our clients ask for, and for good reason. An interest-only mortgage can provide clients with flexibility, helping them to keep their outgoings lower and thus maintain liquidity. Clients with interest-only mortgages are committed to lower monthly payments, meaning they can pay off more capital when they are able to. This makes interest only ideal for high net worth (HNW) individuals who receive large bonuses, or are self-employed with large dividends.
Fortunately, there are some excellent options currently available. Our product of the week is a 2-year fixed rate of 1.84%, which offers interest-only mortgage borrowing up to £3million at 65% loan to value (LTV). This product is suitable for residential mortgages, typically with the eventual sale of the property used as the repayment strategy.
In terms of the fixed-term product period, a 2-year fixed rate can be a good option for those who want a balance between stability and flexibility. Although longer term fixed-rate mortgage products provide more certainty, many HNW borrowers like to keep their flexibility and liquidity high.
If this sounds like you, a 2-year fixed rate may be a better solution. You’ll be protected against potential rate rises for the next few years, but if your circumstances and aspirations should change, you won’t have too long to wait to seek another mortgage product.
Furthermore, this product has a low arrangement fee of just £1,999; many arrangement fees are calculated on a percentage basis, so on a large loan, this can get very expensive.
Securing a sub-2% rate for this level of borrowing—especially on an interest-only mortgage basis—is very unusual, so this is a very strong offering if you are hoping to borrow a large amount. This is also a higher LTV than many lenders would offer on a pure-interest only basis. If you are looking to borrow more than £3million, this lender can also work with you, although borrowing would be capped at 60% LTV.