With mortgage charges reaching the very best degree for the reason that 2008 monetary disaster, Britons have been assessing the choices out there to assist make month-to-month repayments turn out to be extra manageable.

As a part of a spread of initiatives launched to help struggling debtors, many lenders have agreed to permit prospects to change to interest-only funds for six months so long as they’re up-to-date with their funds, with out impacting their credit score rating.

Claire Flynn, a mortgages skilled at Confused.com stated: “An interest-only mortgage means you only pay back the interest amount each month. This is different to a repayment mortgage which requires you to pay both the interest and some of the loan back each month.

“These are rarely offered for residential homes due to the extra risk involved and are much more commonly used for buy-to-let properties.”

Ms Flyn stated the “main benefit” of an interest-only mortgage is decrease month-to-month funds. However, she famous “there are a number of things to consider” earlier than deciding on this feature, as it will possibly price “more in the long run”.

Less time to repay the mortgage with out extending the time period

By switching to an interest-only deal for some time, debtors gained’t be repaying any of the mortgage quantity throughout this time. This means individuals will face a shortfall once they return to their common mortgage funds.

Ms Flynn stated: “In order to repay the loan before the end of the term, you either need to opt for higher monthly repayments, overpay the mortgage or clear the remaining debt at the end of the term.”

People might be able to lengthen the mortgage time period, however it would imply they’ll must pay extra in interest general. Ms Flynn recommended individuals converse to their lender to seek out out what the phrases are as “it could cost you more in the long run”.

Returning to excessive funds could be troublesome

Interest-only mortgages are solely a short lived measure that lenders have stated they could solely permit individuals to change to for six months. Ms Flynn identified that those that get accustomed to budgeting for a smaller quantity could discover it tougher to return to a compensation mortgage when the interval ends.

She stated: “If you are still struggling to afford the repayments at that time, you should speak to your lender to find out what other support options are available to you.”