Interest only mortgage availability

elpobre_2

I am planning to remortgage shortly, and although I could happily afford the monthly rate on a repayment mortgage, I am planning to apply for an interest only one for a few reasons, the main one being that I am paid a fairly large chunk of my income in an end of year bonus and it would give me a lot more flexibility than a repayment mortgage, and the other one is that I've been given some money from my parents to clear some credit cards, and I would like to pay them back for that over the next few years.

I seem to remember reading at the end of last year that the FSA are classing IO as higher risk, and that availability could be affected...

Is there much truth in this? Is the lender likely to say, if you can afford a repayment mortgage, then you should take a repayment mortgage..?

Or are they still freely available and not a problem if I can show that I can afford to pay an adequate amount into an ISA or such like each month?

Any help appreciated.

I don't want to bother any mortgage advisers as yet because I don't want to apply for a mortgage until my credit cards are shown as clear on my credit report (another few weeks presumably as I have only just cleared them)

_Andy_

What is your LTV?

elpobre_2

Just under 75%

Senior_Paper_Monitor

The key issue is whether you have an acceptable repayment vehicle/plan in place - ISA, Pension, downsizing et.

No vehicle/plan then not acceptable these days.

Vehicle and/or sensible plan (not based on escalating house prices) and should be OK if all normal requirements met - BUT IO not getting any easier these days.

You could also consider part repaytment/part interest only option.

elpobre_2

thanks for that

Conrad

Most lenders will allow pure interest only under 75%, with 'overpayments' and adequate means of repaying the capital.

I argue in fact that relying on the unknown returns of an ISA is far more risky compared with straight forward 'known' overpayments that are not dependant upon general 'unknown' future returns.

I have pure I/O as does my Accountant. Much more control and also with a normal repayment mortgage the interest is front loaded and a deliberately small amount of capital is chipped away in the early years.

I/O is by far the best route for those able to sensibly manage thier overpayments.