Deposit – The LTV (loan to value) amount offered on interest-only mortgages is typically lower than for repayment mortgages, making the deposit requirement greater.There are lenders that will consider first-time landlords, however, these are likely to be more specialist providers. Experience – If you’re looking to purchase for investment purposes, some lenders will prefer that you have prior landlord experience, particularly in the case of HMO (house of multiple occupancy) mortgages.There are also some lenders with no maximum age requirement. Age – Most lenders have minimum and maximum age thresholds, although some interest-only mortgages are intended specifically for older borrowers, such as a RIO ( Retirement interest-only).Luckily there are specific bad credit lenders, and bad credit brokers who specialise in this area. However, serious credit issues could still be a stumbling block. Credit history – your credit rating will be less impactful to the outcome of your mortgage application than it would for a capital repayment mortgage, especially in the case of buy-to-lets.Income and affordability – you’ll need to prove that you can afford the repayments, and, in many cases, that you have an income in line with the lender’s minimum income threshold for this mortgage type. Lenders will typically expect you to meet the following requirements: If you’re able to meet the criteria, however, it’s perfectly possible to use an interest-only mortgage to purchase residential property.Ĭriteria varies from lender to lender, although will generally be stricter across the board in the case of residential purchases. In fact, some lenders will only consider this type of mortgage for high-net-worth individuals. Often there are large deposit and/or equity requirements and high minimum income thresholds for residential purchases. In the past few years, however, interest-only mortgages have become more commonplace for residential purchases again, albeit with stricter criteria. Since the financial crisis in 2008, lenders have been more reluctant to offer interest-only mortgages on residential purchases, but have continued to offer them almost exclusively for buy-to-let investment purchases. Yes, although they are not as readily available as they once were and the lending criteria for them is usually more stringent compared to residential mortgages.
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