How does an interest only mortgage work? Typically the interest-only period lasts between 5 to 10 years. During this time you only pay the interest on your mortgage, not the principle itself.

Once that interest only home mortgage period ends, you start to pay both interest and principle. Alternatively, you can sell the home to pay off the full principle.

How much you’ll pay after switching to or taking out an interest-only mortgage depends on your loan, house value, and how much principle is left. You’ll want to use a mortgage calculator to find interest only, which would be your payment.

Those with standard residential mortgages may be wondering, “Can I change my mortgage to interest only?”. We’ve put together a full guide to help you understand your options, but in general the answer is yes.

There is a Mortgage Charter, for example, which lets you transition to an interest-only mortgage for six months. This is designed to give you relief in your repayments without an affordability check.

Long-term interest only mortgage rates aren’t for everyone. You’ll only want to get an interest only home mortgage in these example scenarios:

1. You are flipping a property, and intend to sell it at the end of the loan period.
2. You’re investing the principle in another investment method, and plan on paying off the principle at the end of the loan period.

Short-term interest only loan mortgages are used to help smooth over difficult financial periods. For example, if you lost your job you may switch to an interest only loan for six months while you job hunt.

You may also take out an interest only lifetime mortgage. Lifetime mortgages let you extract equity from your property to make large-sum payments after you are 55. Typically you don’t pay interest and it’s all paid back to your lender when you pass on and your home is sold, but you can opt to pay interest on an ongoing basis to increase the amount you can pass on in your inheritance.

After the loan period ends, you’ll either need to start paying the principle on top of those interest only mortgage interest rates, or you’ll want to pay off the entire principle (which you can do if you sell the property).

There are many advantage of opting for interest only mortgage rates:

• Lower initial payments: while you do need to pay the entire loan off, with an interest only home mortgage you can lower your initial payments until you’re more financially secure.
• Flexibility: You can put the principle payment you’re saving into another investment avenue.

While the interest only mortgage rate is tempting, it’s not for everyone. The problem with interest only loan mortgages is that:

• You may end up in negative equity: This happens if property values drop for any reason, at which point you won’t be able to pay off the principle by selling the property.
• Payment shock: You’ll need to pay both the interest and the principle at the end of the term, which can be a shocking increase.

Regardless of why you want or need an interest-only mortgage, you will want to go to an independent interest only mortgage broker. This is because an independent interest only mortgage broker can source offers from hundreds of lenders, giving you more options to choose from.