Interest only mortgage

St0lli

Naive question here! Is the idea of interest only mortgages that they are only held for a very short term or can they be used like the old style endowment mortgages where you take out some kind of insurance to pay it off in the longer term?

I've got an interest only mortgage but obviously I don't want to be left with a huge sum to be paid off that I can't pay and end up having to sell my house to pay it off.

My mortgage advisor didn't explain too much about it at the time it was taken out and he has now apparently disappeared off the face of the earth!

beecher

You need to have a repayment vehicle in place. You could phone up your lender and ask to be changed to a repayment mortgage.

St0lli

Thanks for your reply. Unfortunately I'm in a fixed term for another 2 years with massive penalty clause if I try to leave early.

beecher

It shouldn't matter - you should be able to change from interest only to repayment at any time. You wouldn't be leaving. Do you know what your Loan to Value is? You need to make sure you're not in negative equity which is more of a risk when you're interest only.

nw_man

Beecher, once again is correct :T

But I just want to add that I dont think negative equity or otherwise matters when converting from interest only to repayment with the same lender surely ?

beecher

nw_man wrote: »

I just want to add that I dont think negative equity or otherwise matters when converting from interest only to repayment with the same lender surely ?

It doesn't matter - I just think the OP should find out as it might make their move to repayment a bit more 'urgent' than otherwise. Since their adviser didn't explain how interest only mortgages work, I thought they might also not realise the implications of having negative equity when their deal comes to an end. With any luck they've got tons of equity and it isn't an issue anyway.

St0lli

beecher wrote: »

It doesn't matter - I just think the OP should find out as it might make their move to repayment a bit more 'urgent' than otherwise. Since their adviser didn't explain how interest only mortgages work, I thought they might also not realise the implications of having negative equity when their deal comes to an end. With any luck they've got tons of equity and it isn't an issue anyway.

Hiya, yes you are correct I don't have negative equity and the rate was fixed at a whopping high rate last July so it may not make too much difference in the repayment versus the interest only. Or maybe thats just wishful thinking! :eek: