Interest Only Mortgage Query

Wutang_2

Deleted_User wrote: »

You can't have 'part repayment' and 'part-interest only'.

I think you need to be careful what you say mister.

getmore4less

Deleted_User wrote: »

Sorry Megarchie if others (and myself) have been critical, but some of the things you have posted are quite alarming, like the above. There's no such thing as a 'part interest-only' mortgage - it's either repayment or interest-only. You can't have 'part repayment' and 'part-interest only'.

The issue seems to be that you haven't understood what 'interest-only' actually means, which is quite worrying.

Yes you can.

Many(probably most) lenders will let you(subject to approval) have repayment and I/O in any % combination you want.

[Deleted User]

getmore4less wrote: »

Yes you can.

Many(probably most) lenders will let you(subject to approval) have repayment and I/O in any % combination you want.

But not on the same product, which is what I was trying to suggest.

If the monthly interest on your mortgage is £500 (say), then an IO means you pay £500. If you pay £501 then by its very definition you have a repayment mortgage.

You can, of course, have part IO and part-repayment if there are two products on the same property (we have this, for example), but they are separate mortgage products, not one product, surely? Otherwise the idea of interest-only can't exist if there is interest+repayment, logically.

jeferey

I had a part Interest Only and part Repayment mortgage for a few years with the same company and product. I couldn't afford to go to a FULL repayment mortgage straight away and the lender was happy for me to change my payments.
By definition, a Repayment mortgage is one where the payments are such that the mortgage balance is paid off in a set period of time.
When I had a part I/O and part R/P mortgage there was no such arrangement and I could have stopped the extra payment at any time and reverted to interest only. It all depends on the lender and their Terms and Conditions for the product.
I now have a flexible mortgage with ING (at 1.39%) which I can overpay / overpay / have holidays, etc. but I have gone for full repayment.

getmore4less

Deleted_User wrote: »

But not on the same product, which is what I was trying to suggest.

If the monthly interest on your mortgage is £500 (say), then an IO means you pay £500. If you pay £501 then by its very definition you have a repayment mortgage.

You can, of course, have part IO and part-repayment if there are two products on the same property (we have this, for example), but they are separate mortgage products, not one product, surely? Otherwise the idea of interest-only can't exist if there is interest+repayment, logically.

You can have it on the same product some lenders will also allow different terms for different part within the same product and different interest rate as well.

Boozer

Did the person who you took the mortgage out with not explain that you would need some other investment to pay off the loan after the 15 year term is up???

Why did you take 15 years instead of 25???

On the bright side, you have discovered it now, if you had let it run the term and then realised, you would be in even more trouble.

Dan_1976

Interest only is the repayment method bunglejemson, its a seperate issue to the product. It is possible to in some cases, have interest only on a fixed rate and at the same time have a tracker on repayment all on the same loan.

If you clever you can juggle swords and eat fire while completing the forms! lol

When endowments fail it can be used to cover a shortfall.

Snippa

Interest only is the repayment method

Interest only is by definition not a repayment method. If you're only paying the interest, you are not repaying the capital sum at all, in any way.

If you're overpaying, or paying more than you need to pay on the interest only mortgage, you'll be paying off some of the capital at the same time. But with interest only, however much interest you pay, however long you pay it for, you never touch the capital sum borrowed, and therefore never reduced the interest charged per year on it.

At the end of the term - be it 10, 15, 25 years - you still own the full, whole amount of what you borrowed, and it still has to be repaid in full. If you can't repay it, the only option is to take another term loan, with the same interest charges for a further 10, 15, 25 years or whatever.

You can take other products - a repayment portion, or an endowment, or a savings account, which is designed to pay off that capital at the end of the term, but that is totally separate to the interest only mortgage.

Dan_1976

Yep interest only is a repayment method which also requires a repayment vehicle. Repayment method is just a term used. Mr clever pants!

[Deleted User]

Well, I've learn something new today!

I'm not sure what the moral of the story is though. At least the OP now knows what's what while they still have plenty of time to cut the balance down.