Quarter of Brits on interest only mortgages

lostinrates

I think we'll not be paying off till well in fifties: one way or another.

noh

nearlynew wrote: »

The thought of even having a mortgage at 51 would frighten me.

I'm 53.
I have an interest only offset mortgage lasting until my 65th Birthday.
The interest rate is base + 1% so currently 1.5%.
Until March this year my mortgage was 100% offset.
I withdrew the offset amount and put it in an egg savings account at 6.3%. That came to an end earlier this month and the money is now in the Halifax at 5.2% until end of November.

Having an interest only offset mortgage allows me to take advantage of times like this when I can get a higher rate on savings than I pay on the loan. It also gives me a cheap and readily available source of funds should I need them.

Some of those included in the 25% figure will be doing the same as me.

Are we doing the wrong thing?
Should I be frightened?

Really2

noh wrote: »

Should I be frightened?

Most probably, you will be beaten up by some on here for being so clever with your cash.:)

I think the misconception is IO= Can't afford repayment.

In reality for many IO = someone who wants to manage their mortgage and hopefully make the most of their cash.

JonnyBravo

noh wrote: »

I'm 53.
I have an interest only offset mortgage lasting until my 65th Birthday.
The interest rate is base + 1% so currently 1.5%.
Until March this year my mortgage was 100% offset.
I withdrew the offset amount and put it in an egg savings account at 6.3%. That came to an end earlier this month and the money is now in the Halifax at 5.2% until end of November.

Having an interest only offset mortgage allows me to take advantage of times like this when I can get a higher rate on savings than I pay on the loan. It also gives me a cheap and readily available source of funds should I need them.

Some of those included in the 25% figure will be doing the same as me.

Are we doing the wrong thing?
Should I be frightened?

Not in the slightest.

Sounds very sensible to me.

This is the problem with sweeping statements..... there are plenty of scenarios which just don't fit or even disprove the theory. Keep on doing what you're doing I'd say.

Pete111

As others have said - being on an IO mortgage doesn't mean 'never makes capital repayments'

We are on interest only and didn't make any repayments for the 1st 6 months as we used our spare income to do our new place up . Since then and by overpaying regularly, we have paid off 20% of the mortgage in 2 years.

We wanted the flexibility - simple as that.

Moving onto an offset mortgage shortly again as this gives us more options - probably still classed as a 'perilous IO mortgage ' for the figures though!

Really2

nearlynew wrote: »

Each to their own I suppose.

I just like the idea of having no debts (including mortgage) at an earlier age.
I can now spend the next 10 years or so adding to my savings and other investments right up to retirement.

It might not be very MSE but I'm comfortable with it.

Have you never had a mortgage?
I should be mortgage free before fifty, can't say that gives me the right to look down at people with mortgages and call them "debt junkies"

Sorry I quoted you before you thought better and deleted it

Dan:_4

If you work hard, you could clear the balance of an IO mortgage much quicker then a 25 year repayment.

JonnyBravo

Dan: wrote: »

If you work hard, you could clear the balance of an IO mortgage much quicker then a 25 year repayment.

eh?

Meaningless.

If you work hard you could pay off a 25 year repayment mortgage just as fast.

gizmo111

I have an IO mortgage, when I first took it following a messy divorce it was the only way to keep a roof over my kids heads, but I knew that I would be getting higher income as they grew older and I coudl go back to work full time. For the first 3 years approx all I could afford was the IO.
I pay the amount it would be if it was a repayment and overpay any money I have, including holiday savings etc, which I can draw out when I need to spend it. I like the flexibility of having to meet a low minimum repayment. It has around 16 years to run but I hope to clear it in around 6 - not all IO mortgages are lifetime debt traps.

Dan:_4

JonnyBravo wrote: »

eh?

Meaningless.

If you work hard you could pay off a 25 year repayment mortgage just as fast.

In theory, yes. But you will have much more flexibility to pay off the balance on an IO product. For example, the first few years you are paying very little capital anyway, so unless you intend to run the full 25 year course, it makes little sense to be on repayment. Also, you can usually make a lump sum payment at anytime on IO.

It all comes down to individual attitude to risk, and personal financial discipline.