Lenders are a lot more reluctant to give applicants Interest Only mortgages nowadays and are increasingly making conditions harder to apply and qualify for them.
It is nearly impossible to get a mortgage on interest only above 75% nowadays unless you can demonstrate that you have significant financial difficulties. A good few lenders will allow you to borrow up to 75% of the property value but quite a few lenders have also reduced their maximum Interest Only lending to 50% of the property value. Some lenders have impossed a criteria that you must have a valid method in place at the time of the application to repay the interest only mortgage you plan to take out. This could be through an investment product such as ISA's or Endowment but it must cover the full value of the mortgage you are looking to take out. Some lenders will even insist that this repayment vehicle must have been in place at least 6 months prior to application. You may be asked if you have any other property (such as buy to let) that could potentially be sold to repay the Interest Only part of your mortgage<u> but you must be in possession of the property at the time of application.</u> Other lenders will allow interest only if you have a certain value of equity already in your property but this normally is in excess of £100k equity needed.
While you hope to have your relatives property to sell and clear the interest only mortgage the lender unfortunately will not accept this unless you can show that you are the rightful owner of the property right now. There is nothing to say your relative will not change their mind at some point and this will leave you in bother with the repayment.
Speak to a local mortgage broker and get them to look into a potential interest only option but do be aware that the longer you are on interest only the harder it will be to switch your mortgage back to repayment and if at all possible I would advise to remain on repayment and grin and bear the problems.