Updated: February 17, 2022

Getting an Interest Only Remortgage

Looking to extend your deal through an interest only remortgage? There are lots of deals now around! Our in-depth guide will tell you exactly how to find them.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 17, 2022

If you currently have an interest only mortgage, you may be wondering what options are available to you for remortgaging. Refinancing could enable you to take advantage of new deals that weren’t available when you first took your loan.

By following this guide, you’ll understand what choices are available, how to get the best interest rate and where to look for any guidance or support you might need.

Can you remortgage an interest only mortgage?

Yes, it’s possible if you meet the lender’s eligibility criteria and pass their affordability checks. There’s a whole host of reasons why you might want to do consider remortgaging from your existing deal to another – either with your current lender or a new one – such as:

  • To take advantage of a better interest rate and lower your monthly payments
  • Extend the term of your current mortgage to give your repayment vehicle more time to get on track to repay the outstanding capital
  • Increase your original borrowing to carry out renovations to your property or consolidate existing debts
  • To switch from interest only to a repayment remortgage, to provide more certainty on the loan being repaid

There are lots of different options so using the services of a broker who specialises in remortgages can shorten the search and reduce the stress of finding the right product for your circumstances.

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How to get the best interest rate

Getting the best interest rate when remortgaging can make a huge difference to your monthly repayments. By following these three simple steps you can find the right deal for your circumstances.

Step 1

Start early. The best way to pay less is to remortgage at (or sometimes before) the end of your initial rate period. By finding a new deal with the best rates, you can avoid being switched to your lender’s variable rate – often much higher than fixed rates – at the end of the introductory period.

Step 2

Shop around. To get the best rate you’ll need to search the market carefully. Comparisons can be time-consuming so make sure you understand how much you are looking to borrow, how much equity you have in your property and what monthly payments you can afford

Step 3

Get specialist help. Talk to one of our team of specialist brokers who are experienced in finding great deals on interest only remortgages. Make an enquiry and we’ll match you with an expert who can search the market and find the best product for your circumstances.

Applying for an interest only remortgage vs. a repayment remortgage

The application process for remortgaging is generally the same regardless of which type of mortgage you have. But, there are some key differences a lender will consider for interest-only, focusing mainly around your original repayment strategy.

For example, they will want to know:

  • What was the original exit strategy?
  • Is this still on track to repay the original capital back?
  • If not, what is the revised plan and is it acceptable to the lender?
  • Has the property increased in price since it was originally purchased?

If the answers to the above questions are all positive, then your chances of qualifying for the best remortgage package will be good. If they’re not then it may be the right opportunity to speak with a broker about which other options are worth considering.

Do you need a deposit?

No, you don’t, but for a remortgage you’ll need to have sufficient equity in your property to meet the lender’s loan-to-value (LTV) ratio requirements. Many mainstream lenders, such as Barclays and NatWest currently have a 75% maximum LTV, whilst others have dropped theirs to 50% and some do not offer any interest only mortgages at all.

This is where help from someone who knows and understands where to look for these types of remortgage packages can prove to be invaluable.

Alternative remortgaging options

If you are considering remortgaging from your interest only product there are a couple of options that may be available to you. For example, you could switch to a repayment remortgage or you could choose a part interest, part repayment product.

Capital and Repayment mortgage

You may want to consider switching to a full repayment method, particularly if you’re concerned there may be a heavy shortfall in your repayment vehicle and the chances of it providing sufficient return to repay the capital amount are slim.

Switching to a repayment mortgage will mean your monthly payments will be higher, as they contain a portion of both capital and interest rather than just interest. But, you have the comfort of knowing you’re guaranteed to repay the original amount in full by the end of the term as long as you keep up with all monthly mortgage repayments.

As with all remortgages, you can do this with your existing lender or – with the help of a broker – find a new one who can offer better overall terms.

Part interest, part repayment

Another option is to switch just a portion of your interest only mortgage to a repayment basis. The advantage of this type of loan is it reduces the amount that your monthly payments will increase, whilst giving you some security that part of the capital is being repaid during the term of the mortgage.

Part Interest, Part Repayment is still a good choice if there’s a projected shortfall in your current repayment vehicle which, if not addressed, could leave a substantial balance at the end of the term.

Buy to let remortgages

In the buy-to-let market, it is commonplace for landlords to take interest only mortgages as they seek to keep their payments as affordable as possible and use profits from the sale of the rental property as the repayment vehicle.

Refinancing an interest only buy-to-let mortgage if you’re a property investor may also be attractive if you need to raise more capital to cover property maintenance costs or you want to expand your rental portfolio.

Get matched with an interest-only remortgage broker

Making the decision to remortgage could enable you to make significant savings over the lifetime of your loan and there’s plenty of options to choose from.

Finding the right product for your circumstances is much easier if you speak to a broker who understands which lenders are likely to offer you the best deal. Maximise your chance of remortgaging for a better deal by calling our team today on 0808 189 0463 or make an enquiry and get matched to the right broker for your situation.

FAQs

Can I get an interest only remortgage if I have bad credit?

Yes, it is possible but if you have a bad credit rating, you will find that the pool of lenders who are willing to lend to you is smaller and the deals available to you are not as attractive. 

However, there are lenders who specialise in such circumstances but you will need to approach a broker who can talk to these lenders on your behalf as they are not generally accessible to the public.

Can I get an interest only remortgage if I am self-employed?

Yes, it’s possible. Most lenders ask for three years accounts but the advisors we work with can help find some who will lend to those who’ve only recently become self-employed.

Ask A Quick Question

We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Remortgages Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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