Bad Credit Interest Only Mortgage Products

We help people with bad credit get mortgages and offer finance from Whole Of  Market Brand Leaders.

  • FCA Approved Advisors. Get A Decision Today.
  • Adverse Credit, Sub Prime, Default, IVA, CCJ
  • Compare UK’s Top Interest Only Mortgage Plans
bad credit interest only mortgages

Pre-Decision In Principle Application Form:

  • Contact
    Get your 1 minute no obligation quote
bad credit interest-only mortgage UK

Benefits of Bad Credit Interest Only Mortgages

For those individuals with poor credit, getting an interest only mortgage is a pretty straightforward process.

 An interest only mortgage means that during the repayment period of the loan, the borrower will only be paying the interest portion of the repayment and will be responsible for handling the capital amount when the term of the loan is over.

 Although this makes monthly payments significantly less, it is important to remember that you are still responsible for handling the capital of the loan.

A borrower can see a number of different benefits from utilising an interest only mortgage. The first and most appealing is that the monthly repayment amounts for this type of loan are very low in comparison to traditional mortgages – it is this reason that many buy to let mortgages use an interest only option.

In this case, the owner of the buy to let property will be able to recoup his or her money in monthly rent payments from tenants, which can then be used to pay off the capital left in the loan.

Another great benefit of using bad credit interest only mortgages is that borrowers can use this financing as a way to get their foot on the ladder of the property management or property investment industry.

Since the monthly payments are reduced, making the mortgage affordable, they are able to then use funds to complete projects. It is important to remember that even though monthly payments are low, a plan needs to be in place in order to pay off the capital balance at the end of the loan.

Using Interest Only Mortgages To Repair Credit

When individuals have debts that are harming their credit, they will often refinance using an interest only mortgage to help pay off the debt and repair their credit. In many cases, the poor credit score will force them to work with either bad credit lenders or sub-prime lenders and in most situations, these lenders offer much higher interest rates than other financial institutions.

 These increased interest rates and other mortgage costs can often make the loan much more expensive than it seems. Although this outlook may seem bleak, it is important to remember what limitations individuals face when looking at getting financing with poor credit.

 Remortgaging with an interest-only mortgage, although expensive, will allow the borrower to pay off all of his or her old debt and improve his or her credit score. Once the credit score is improved, one can then enjoy the flexibility to go to other lending institutions and high street banks for financing at a much more agreeable interest rate based on credit score.

Comparing Interest Only Mortgage Options

As with any type of financing, it is important to shop around with different lenders and mortgage packages to make sure you are getting the best possible deal for your unique situation. In some cases, a mortgage broker may be helpful in finding the right lending institution to meet the borrower’s needs.

 Brokers have great relationships with their lenders, which can often be helpful in negotiating lower interest rates and other aspects of the loan package to make the overall deal more appealing.

Can I get an interest only mortgage with a default?

A default, in and of itself, will not automatically disqualify an applicant from getting a mortgage loan or making their payments on time. What default does do however is increase the risk for lenders and this increased risk could lead to higher interest rates or downgrading creditworthiness which would make it more difficult for someone with less money available to afford monthly payments at current borrowing levels.

So while defaults can be used as an indicator that there’s likely some sort of problem brewing down the road (i.e., high debt load) they don’t guarantee anything by themselves – borrowers need to demonstrate stability over time through demonstrated ability to repay mortgage loans before any type of lending decision can be made

Is it harder to get an interest only mortgage?

Yes, it is harder to get an interest-only mortgage. Lenders are now much stricter about who they will offer this type of mortgage to. This is because, during the financial crisis, many homeowners defaulted on their mortgages when their interest-only payments increased after the initial period of low payments expired. As a result, lenders are now much more careful about who they approve for an interest-only mortgage.

What is wrong with interest only mortgages?

Interest-only mortgages are not for everyone. They’re typically used by people who want to get out of their current house and move up the property ladder but can’t afford the full price of a new place yet. If you’ve saved enough money from working or have access to family resources that will cover at least 20% – 30% of the cost of your home, then this might be an option worth considering. But otherwise, stick with traditional mortgages where you make monthly payments on time until completion.

Other Useful Pages:

Alternatives To Remortgages If You Need To Release Equity

If your credit score has deteriorated BUT you still have a prime mortgage that has a low rate, you might be much better off getting a poor credit secured loan rather than a bad credit remortgage, because the overall cost could be lower.