Q&A

Answer a question


Do you want to follow this topic? You need to be signed in for this feature
Do you want to save this article to read later? You need to be signed in for this feature


Interest Only Mortgage Wanted

Hello, I know Interest Only Mortgages are not a good idea generally but we are a special case. We need one. I thought they had died out but there seems to be plenty of them still going under a Google search...so I wondered which you would recommend or if you know of any? We have high equity in our home and simply a small income so this product would suit us. We have an interest only mortgage right now but need to remortgage. Thank you for your help.

3
Answers


Do you want to answer this question? You need to be signed in for this feature

Answers




An offset mortgage migh help you. Say you take out a 100k OFFSET MORTGAGE you will only pay interest on the amount you use. Say you only use 10K you only pay interest on 10K part of it. That would about £25 per month at current rates. Its a bit like a having a large overdraft facility.



A few providers have stopped doing interest-only mortgages, but others have carried on. Some of those have reverted to the original idea behind interest-only mortgages, which was for there to be an investment vehicle which would repay the mortgage by retirement date. This could be the 25% tax-free cash of a pension scheme, for instance When you reacg retirement you will have less income with which to pay interest, so hence the requirement to clear the mortgage by then. Mike



Interest Only is a generic terminology and the press has confused the public over the years, as whether you have a repayment vehicle or plan or not, the loan itself is still 'interest only'. If you have high equity (and of course meet the normal critieria) then you will find that you have the potential to obtain a mortgage on this basis, but the vast majority of lenders will wish to see some form of repayment plan or for you to state your intention for repayment. I assume here that you are talking about your domestic property rather than a buy-to-let or investment property, where interest-only mortgages are still very much 'the norm'. A number of lenders now have quite stringent requirements - for instance one lender i shall not name but it begins with H and ends in alifax will consider interest only IF you can evidence an existing investment vehicle with a balance or value of £50k, whereas others might accept the intention to set one up as long as your 'affordability calculation' includes the cost of that committment. A mortgage broker can point you in the right direction regards 'pure' interest only, or if your needs are slightly more complex then an IFA may be better suited. If you cannot find a suitable pure i.o option and for whatever reason are not happy with taking proper qualified advice on the matter then consider effecting a morgage on repayment for the longest possible term as this will reduce your monthly committments - the longer the term the less being actually repaid whilst the interest element will be at the same level (at least initially). phil