fbpx Mortgages and Furlough: How to get a mortgage after being on furlough. Read more Chevron
Arrow Arrow
Scroll to top

First time buyer interest only mortgages

Can I get a first time buyer interest only mortgage? Get the right advice here.

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 27, 2021

It’s fair to say that interest only mortgages are a lot less prevalent than they used to be, with an estimated 50% reduction in their number over the last five years (at the time of writing).

Can a first time buyer get an interest only mortgage?

Yes, through a niche mortgage lender this could be possible.

At the time of writing, a first time buyer interest only mortgage is quite hard to obtain, with only one or two lenders prepared to offer them: and even then, the lending criteria is quite tough to meet.

That’s largely because the regulator and lenders themselves are now extremely wary of any interest only mortgage, and particularly, it might be assumed, for first time buyers.

That’s considered to be a shame by many people in the know. In fact, we’ve spoken to a number of the experts we work with to ask them if an interest only first mortgage is a good idea, and they generally agreed that it can be.

While these products are usually more difficult to obtain than capital repayment mortgages, with the help of the specialist brokers we work with, it may be possible to find a lender who’s willing to offer interest only mortgages to first time buyers.

What are the benefits of interest only mortgages for first time buyers?

Well, one of the factors that responsible lenders have to take into account is affordability, and the fact that there is no repayment portion of an interest only mortgage means that monthly payments are lower than those of a standard repayment mortgage.

So, an interest only first mortgage has the potential to make life far easier for those taking their tentative first steps on the mortgage ladder thanks to the lower monthly payments. First time buyers can enjoy these for a few years, then switch to a repayment mortgage.

After all, assuming you buy your first home by the age of 30, you still have around 40 years to make sure your home is fully paid for, so interest only mortgages for first time buyers shouldn’t really be seen as a problem.

What is the eligibility criteria for a first time buyer interest only mortgage?

As you might expect, with lenders not exactly falling over themselves to offer interest only first mortgages, the lending criteria is pretty strict.

Deposit and income requirements

Most lenders that will consider interest only mortgages for first time buyers expect you to have a 25% deposit, an annual income in excess of £50,000, and a rock solid repayment vehicle in place that doesn’t involve selling the property.

Why do I need a repayment vehicle?

In a nutshell, the lender needs to be sure that you have a way of paying off the mortgage at the end of the term.

Well, if your exit strategy is all about selling your home in 25 years time, it begs the question: where will you live once you’ve redeemed a mortgage that’s just as big as it was 25 years ago? Certainly house price inflation and good old fashioned monetary inflation will have made that figure less significant over the years: but it still doesn’t mean that the equity you might walk away with would pay for somewhere else to live in your retirement.

Particularly since the credit crunch, lenders are much less confident about endless house price rises than they used to be, making interest only mortgages for first time buyers a pipe dream for some  people, for the foreseeable future.

Having said that, the experts we work with are always willing and able to help first time buyers find the mortgages they need. Make an enquiry to speak to them today.

Can I get an interest only buy to let mortgage as a first time buyer?

Interest-only mortgages are pretty much the norm in the buy to let market, so you may find that getting a first time buyer interest only mortgage is easier to obtain for a buy to let than for your primary residence.

Even so, you will generally need at least a 20% deposit, a steady income that allows you to pay the interest between tenants, and to be buying a property that has clear rental potential.

Buy to let lenders usually prefer borrowers with landlord experience, but the experts we work with have access to specialist BTL mortgage providers who might consider offering these products to first-time investors, under the right circumstances.

If your heart’s set on becoming a landlord, the experts we work with will always be happy to tell you about interest only buy to let mortgages for first time buyers.

Feefo badge

What are the alternatives to a first time buyer interest only mortgage?

The prime attraction of interest only mortgages for first time buyers is that the monthly repayments are usually lower. However, unless you have a cast iron method of repaying the capital you owe one day – and that doesn’t involve selling the property – you’re effectively just kicking the can down the road by choosing a first time buyer interest only mortgage.

Instead, if affordability is your prime concern, why not simply consider taking a repayment mortgage out over an extended term? While 25 years was once the standard term, even for first time buyer mortgages, many lenders will consider 30 years now, with a fair few offering 35-year terms and one or two even willing to arrange mortgages over 40 years.

It should be pointed out that a longer mortgage term will mean that you pay more interest in the long run. However, if you’re more concerned with keeping your initial monthly repayments down – and you may move house when your salary allows anyway – a longer mortgage term may well be a good idea.

Furthermore, there may be other mortgages products that you qualify for which are a better fit for your needs and circumstances .

Will first time buyer interest only mortgage ever become mainstream again?

At the time of writing, many potential buyers are asking: “Can a first time buyer get an interest only mortgage?” At this particular moment in time, they’re largely reserved for the fortunate few with a 25% deposit and an income over £50k, for a residential property.

Having said that, with high property prices making it so difficult to get on the housing ladder and overall affordability being such a hot topic, many of the experts we deal with believe that interest only mortgages for first time buyers are a good thing, and that there should be more available.

It may be that while so many over 55s are coming to the end of their working lives  – and their mortgage terms – without a repayment vehicle for their interest only mortgage, the market and the regulator will still view interest only mortgages for first time buyers with considerable caution.

Opinions may be slowly changing however, and many industry experts think that the first time buyer interest only mortgage could yet make a real comeback. In the meantime, there are plenty of great mortgage deals still out there for first time buyers.

Can I get a Help to Buy interest only mortgage?

No, the Help to Buy scheme is only available for capital and repayment mortgages. Make an enquiry to find out what other options might be on offer for borrowers looking for an interest only mortgage for first time buyers.

Speak to an expert about interest only first time buyer mortgages

Call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here. Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s no obligation or marks on your credit rating.

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 Interest Only Mortgages
Ask us a question and we'll get the best expert to help.

1 of 3
2 of 3
3 of 3 Send!

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!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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 who 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.

Maximise your chances of approval, whatever your situation. Find your perfect mortgage broker

Get the ‘YES’ you’ve been waiting for 👍

Our broker matching service will match you to a real human being who’s a specialist in your circumstances – for free!

Your expert will find you the best deal that’s right for you and be with you every step of the way.

Get Started