How do you intend to pay off your interest only mortgage?

surreybased

HI,

Am interested in the orginial question..how are people preparing to pay off capital on IO mortgages? For me IO is potentially a big risk for the future. We're had endowment mis selling could IO be similar?

princeofpounds

You are assuming that everyone bought at the peak.

Exactly the assumption every one was NE was very flawed.

Going to have to bang my head against a wall in a minute. I am NOT saying EVERYONE is in negative equity - I guess my sentence above containing that word wasn't well-phrased, but my point was unless *everyone* had sufficiently low LTV then there would be a good proportion in negative equity. I was asked if I had any figures that the japanese had a negative equity problem - that is pretty self-evident.

You only need a tiny proportion of people in negative equity to destroy an entire banking system. RBS equity for example would be wiped out if only 3.5% of its assets (loans) went bad.

Reversing back up to my original point, yes you would be unlucky if you were caught in such an economic situation. But not as unlucky as you think, given it has happened twice in the last century in the world's two largest economies and potentially could happen again.

My only point (go back and read it) is that you cannot rely on inflation to repay your mortgage, it is not foolproof. I was challenged to find examples, I did.

new_home_owner_3

i have two interest only mortgages one 100,000 pound on a house worth now 150,000 and a 150,000 pound one on a house valued at 225,000.

The one for 100,000 i am renting out and making about 300 pound a month, i save that and i will pay the capital of on the one that i owe 150,000 on.

Im in it for the long run hopefully in 10 to 15 years i will be mortgage free, thats based on my house worth 150,000 pound will have gone up 25% in 15 years and i have maintained renting it out long term.

Thats without taking into account rents going up, if they do i will be even better off, however if it all goes wrong and house prices collapse, i will be in a world of pooh........

Really2

tiggerjj wrote: »

Eh? I dont understand? Please someone clarify

Offset mortgages are Interest Only by default.

You have to ask the lender to set up capital repayment if you are not going to manage it yourself.