Interest-only mortgage - shortfall worry.

Robert_Sterling_3

maninthestreet wrote: »

By taking an interrest-only mortgage, you are no better off than if you had been renting the house - at the end of the mortage term, you will not own even a small percentage of the house, just the same as if you were renting it for the same period.

True. However the OP does own a considerable percentage of the house at present.

A_Nice_Englishman

Once the OP turns 60, he will probably qualify for social housing regardless of income/capital. He could sell up and live off his capital, or carry on working and keep the capital to pay for care if he needs it later on.

silvercar

Over any 25 year (general mortgage period) span prices have always risen.

If you are going to say it is cheaper to have rented for all that time, you have to allow for prices being higher at the end of that time than at the start and rental being higher over the time period than the start.

If you choose to rent rather than buy interest only you also need to factor in the cost of moving as you willl only ever have rights to remain in a property for 12 months.

I think it is a legitimate choice to have an interest only mortgage while you want a big home (to bring up children for example) but you may have to accept trading down in retirment when the nest is empty. Renting would never give you the option to cash in your equity and buy outright in retirement.

michael1983l

Robert_Sterling wrote: »

I think that you are unfair to o4u.
o4u is giving an opinion. No more No less.

I do not think I am being unfair at all, the person is 56 years old they do not deserve to be spoken to like a child. They own almost 2/3 of the property, they are far from being foolish, there are plenty of options there in that situation.

amersall

who gave this mortgage? without an endowment or other vessell in place to repay the capital. no wonder the financial institutions are in a mess ( this is not a criticism of the original poster )

opinions4u

michael1983l wrote: »

I do not think I am being unfair at all, the person is 56 years old they do not deserve to be spoken to like a child. They own almost 2/3 of the property, they are far from being foolish, there are plenty of options there in that situation.

Message to the OP - I apologise if you feel that I have in any way spoken down to you. That was not my intention. I have tried to highlight potential solutions, building on the ones you are beginning to consider yourself. Best of luck resolving it and well done for realising that you need to do something about it.

Michael, I could have said something along the lines of "oh the nasty bank/broker/adviser who put you on interest only. How awful for you. I think you should complain all the way to the ombudsman with a view to winning several thousand pounds to put you in the position you would have been in had you taken a repayment mortgage".

But the OP is, as I understand, taking responsibility for the situation and looking for clear guidance. Not nice words.

staffie1

opinions4u wrote: »

Your decision to take an interest only mortgage was flawed.

What were you thinking, OP, when you took out an interest-only mortgage with no provision to pay back the capital you borrowed..?? How did you think it was going to be paid off?

michael1983l

Ok I understand what you are saying o4u but I do not think the persons situation is too critical. There are a number of options out there that are suitable, of which some have been mentioned already. Obviously its not the ideal situation to be in but its also not the end of the world. Cash in and take social housing makes sense, or downsizing. Personally on reflection I think during this 9 year period the property is likely to grow in value, which could solve their problem for them. In 7 years they could sell up and not have to downgrade too much.

michael1983l

staffie1 wrote: »

What were you thinking, OP, when you took out an interest-only mortgage with no provision to pay back the capital you borrowed..?? How did you think it was going to be paid off?

Thats the point, they didn't plan to pay it off and now they politely asked some advice on their other options.

RobertoMoir

michael1983l wrote: »

When people ask questions, if you don't want to answer it constructivly whats the point in being rude about it?

Telling people stuff that they need to hear but don't really want to hear isn't rude, despite some people thinking so. I'd argue that the one person who is prepared to lay things out for someone without sugar-coating it is quite often the one giving the best advice.