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Low Start Mortgages (also commonly referred to as Deferred Interest Mortgages) is a mortgage whereby some or all of the interest due to be paid by the borrower during the early term of the loan is added to the mortgage balance, and repayment is postponed until later on during the mortgage.
Here we explain Low Start Mortgages / Deferred Interest Mortgages and how they work. We also suggest possible alternative mortgage solutions that we can help with.
Table of Contents:
So, as we outlined above, a Low Start Mortgage (also commonly referred to as a Deferred Interest Mortgage) is a mortgage where some or even all of the interest due to be paid by the borrower during the early term of the loan is added to the mortgage balance, and repayment is postponed until a later stage of the mortgage.
Low Start Mortgages were popular during the 1990's, although the implications were not always properly explained to, or understood by mortgage borrowers.
The low start mortgage lenders often deferred interest on the mortgage over the first five years. For example, a lender offering the 5, 4, 3, 2, 1 deferred mortgage scheme, postponed interest over the first five years as follows:
| Year 1: | Deferred Interest of 5% |
|---|---|
| Year 2: | Deferred Interest of 4% |
| Year 3: | Deferred Interest of 3% |
| Year 4: | Deferred Interest of 2% |
| Year 5: | Deferred Interest of 1% |
| Total deferment of interest over 5-years: 15% (ie 5% + 4% + 3% + 2% + 1%) |
|
The impact of rolling-up the unpaid interest was quite dramatic with some of the schemes, and on one of the more notable schemes offering a deferment of 8, 7, 6, 5, 4, 3, 2, 1. At the end of the eighth year of deferment, the mortgage balance had increased by approximately 50%.
The Deferred Interest Mortgage these days is generally marketed to professionals whose income is likely to increase rapidly in the future.
We certainly can. However, it is important to note we do not offer deferred repayment mortgages. We believe there are more appropriate solutions these days, including fixed rate mortgages, discount rate mortgages, flexible mortgages, and interest only mortgages.
Our professionally qualified advisors will of course be happy to assess your circumstances, needs and aspirations, and provide you with advice and a recommendation. Our mortgage advisors are available from 8am until 10.00pm everyday including weekends on Freephone 08000 282 281, and you can also enquire online anytime, and we'll be delighted to provide you with an in-principle decision, whatever your circumstances!
Hopefully we've managed to shed a little light for you on low start mortgages and deferred interest mortgages, and answered any initial questions you may have had. If you feel we can be of assistance, we would love to hear from you!
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
Are you worried and becoming stressed because you are having problems getting a mortgage or remortgage? Worry and stress no more! Here at Shire Direct we provide tailor made mortgage solutions to suit you, and can usually help with all kinds of circumstances including...
Remember, we're here to help, and would love to hear from you!
Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.
Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.
