Interest only mortgages

Interest only mortgages are loans against a property where the capital is not repaid, just the interest. Therefore the value of the loan never reduces. Most interest only mortgages do not have a time limit like normal mortgages that are usually repaid over 25 years, but the borrower continues to repay the interest until they are in a position to repay the capital.

In recent years interest only mortgages have become more popular as first time buyers have struggled to afford a repayment mortgage. The thinking behind this is that the property will rise in value and when the homeowner sells the property they can use the profit from the sale to put down a decent deposit and be able to get a repayment mortgage. There is an element of risk in doing this because property values can go down as well as up over the short to medium term.

	RBS and NatWest’s new £50,000 rule for interest only mortgages The Royal Bank of Scotland and NatWest have stipulated that only individuals earning £50,000 and above will be considered for an interest only mortgage.
	Nationwide culls interest-only mortgages unless you have 50% equity The Nationwide Building Society will only advance interest-only mortgages to borrowers if they have 50 per cent equity in their homes.
	The decline of interest-only mortgages Figures from the Council of Mortgage Lenders (CML) show interest-only mortgages accounted for just four per cent of first-time buyer mortgages in March 2011, down from a high of 30 per cent in 2007. Kate Saines explains why they are falling in popularity.
	Interest only mortgages An interest only mortgage is a loan secured against the value of a property that is not designed to be paid off.
	How to manage an interest-only mortgage The FSA says 1.3 million people have an interest-only mortgage that matures by 2020 with no way to repay the capital. We show you how to manage the interest-only mortgage timebomb.