interest only mortgage

Euphoria1z

Hi

is there currently a minimum LTV to remortgage to another lener on an interest only mortgage?

When asked by a lender/broker, how your going to pay off the capital, answering by either saying A. remortgage elsewhere, B. sell the prioperty in the future, are these acceptable answers as far as the lender is concerned? or will they be asking for proof of endowment, winning the lottery or changing it to repayment kinda answers?

cheers all.

_Andy_

Varies lender to lender

What is your actual LTV and how are you actually intending to repay the capital?

phlash

Let's hope we don't have a deflationary spiral, selling the property might not cover the debt. Thats the problem with the assumption that "I/O is ok because we are generally in an infaltionary environment", there are nightmare scenarios which make the exposure to risk horrific by assuming that your asset will cover your debt.

Large debt, small asset value....nightmare.

Euphoria1z

_Andy_ wrote: »

Varies lender to lender

What is your actual LTV and how are you actually intending to repay the capital?

dont know for sure, but bought with a 15% deposit back in 2007.

i intend to pay back the capital to this lender by remorgaging to another lender.

i also intend to keep the house forever, or worst case scenario, sell it in 30 yrs time to downgrade.

beecher2

Euphoria1z wrote: »

dont know for sure, but bought with a 15% deposit back in 2007.

i intend to pay back the capital to this lender by remorgaging to another lender.

i also intend to keep the house forever, or worst case scenario, sell it in 30 yrs time to downgrade.

How will you be able to keep the house forever if you haven't paid any of the capital?

_Andy_

Sale of house is unlikely to be acceptable as a repayment method to a lender.

Euphoria1z

_Andy_ wrote: »

Sale of house is unlikely to be acceptable as a repayment method to a lender.

Thanks

thats the answer i was looking for.

as you have said unlikely, i take it thats not the final answer?

i have a buy to let that i would use (if it ever makes me any money) to pay of the capital, but then you could ask the same question, how will i pay off the capital for the buy to let? answer would be the same- remortgage or sell it when its feasable.

beecher- i will carry on paying the interest till i die or decide to sell.
if i get to the age where i cant get a normal mortgage due to age, i would look at the situation then.

beecher2

Euphoria1z wrote: »

Thanks

beecher- i will carry on paying the interest till i die or decide to sell.
if i get to the age where i cant get a normal mortgage due to age, i would look at the situation then.

I didn't realise that was an option - I thought interest only mortgages were for a fixed term and the lender required the money back at the end of the term.

phlash

beecher2 wrote: »

I didn't realise that was an option - I thought interest only mortgages were for a fixed term and the lender required the money back at the end of the term.

Agreed.

Think OP needs to think this through.

Euphoria1z

beecher2 wrote: »

I didn't realise that was an option - I thought interest only mortgages were for a fixed term and the lender required the money back at the end of the term.

well, when you remortgage, dont you decide how long the mortgage term is for?

for example, my dad is in his 50's ( i think) and hes bought a bungalow on a 25 yr term?

my plan will be to change it to repayment from interest only at some point, but not at the moment as i cant afford it.

so, say in 15-20 yrs time, my debt should still be there (apart from any fees added), but the value should increase (im confident itl be more than i paid for in 20 yrs time). and my wage should increase, so it should then be easier to change it to a repayment mortgage in terms of affordability.

obviously assumptions but should the value/wage not have increased in 20 odd yrs time, then i guess everyone will be in some sort of trouble?

Snippa

well, when you remortgage, dont you decide how long the mortgage term is for?

Why don't you take it over a longer term now - say 30 or 40 years - and make it repayment? That way you're at least starting to repay the capital, and taking down the interest.

An I/O mortgage is dead money - it's just renting from the bank. You have a massive debt you're paying a lot of interest on, and never bringing down. It's backed by an asset that might increase, might decrease, might cost you a fortune. Also, interest rates could easily rise much higher, especially over the longer term, and if you're not reducing the debt, that's going to hit you massively.

Have you tried sticking various figures into mortgage calculators to get a feel for exactly how much you're going to cost yourself over 25 years of interest only?