whats the answer

robbomc

Hi Bought a house 2 years ago with the help of my parents.

Borrowed £165.000 of them and know we want to pay it back by getting mortgage on the house.

House valued at £380.000 but bearing in mind current market more reasonable £ 350.000.

Dont want to move as this is the perfect home. Made redundant last year but found a job paying less money but just manageing to get by.

What are your thoughts on repayment against interest only. Things are tight at the moment but cant see how they can improve in the short term?

_Andy_

OK well first of all what income do each of you have (gross annual salaries)?

beecher

You probably need to post details on your salary and any credit commitments to check if you'd be able to get a mortgage of £165,000. I'd guess household salary would have to be over £40,000. If you get an interest only mortgage, most lenders seem to need evidence of how you're going to pay back the money.

robbomc

joint gross salarys approx £40k. No debts. Money in the bank for that rainy day.

beecher

£165,000 over 25 years at 6% would cost you £1,063/month on repayment, or £825/month interest only if that helps

adandem

I would also use your rainy day money, it'll be worth alot more by reducing your mortgage than it would by saving it.

Jonbvn

adandem wrote: »

I would also use your rainy day money, it'll be worth a lot more by reducing your mortgage than it would by saving it.

Not entirely true. Most cash-ISA's offer better interest rates than a lot of mortgages.

robbomc

thanks for any help its much appreciated.

Not sure about paying that money out worried about having no buffer.

What about offsetting and putting the money we have say 20k but not sure how it works can we use it if we have an emergancy.

Need to talk to somebody face to face i think.

Got to do the right thing but its a worry.

ema_o

If you get an offset mortgage you are able to take your savings out should you need them. We are getting an offset mortgage partly cos it was the best rate for us, but also the flexibility means our buffer money will reduce the interest we'll pay.
Effectively if you get a mortgage and offset the £20k you will only be paying interest on £145k. But if you spent the £20k you will pay interest on £165k.
We are going with first direct, they explained it really well to me over the phone so might be an option if you need to talk to someone.

ema_o

Oh, and also it will depend what interest rate you get on your savings, it might not be best to offset.
In answer to your original question I would only pay interest only if I had no other choice or I would get a better return on my money elsewhere.