Interest Only Mortgage Query

Gorgeous_George

You can look at 'Interest Only' as rent but without the benefits and pitfalls of a Landlord. It also locks in the price of the house that you have chosen.

Providing there is a plan for how to deal with the capital repayment it matters little.

If you can buy a house that will last you ten years on interest only or a starter home on repayment, I'd recommend the interest only option. Moving house costs around a year's payments and involves a lot of stress.

Good luck.

GG

MarkyMarkD

And, perhaps more relevantly, if you buy a starter home and house prices fall, you are stuffed because you cannot pay off the negative equity and move.

Whereas if you bought the larger property, on interest only, you can stay there and ride out the negative equity.

We had friends who were stuck (during the late '80s house price crash) in a 1 bedroom starter home with a growing child and no space to breathe. At that time, interest rates were so high that being interest only wouldn't have made a huge amount of difference, but now that is not the case.

ollyshaw

No UK sub prime!

treliac

megarchie wrote: »

We always knew, whether it should be said or not, that some inheritance would eventually be due which would pay it all off, plus that our salaries were due to increase, plus our three children would eventually leave uni, stand on their own two feet and free up more cash our way.

I'm not in a dissimilar situation, but don't count my chickens! How can anyone be sure that the inheritance/s will come through? Elders who end up having to go into care homes may use up most of their assets on funding their own care needs. Jobs/careers/increasing salaries can't always be guaranteed - especially in today's economic climate. Children may be able to forge ahead in good careers and achieve independence, but this is less and less a certainty as things are today.

Is it wise to make so many assumptions about future finances and gamble on them by having an interest only mortgage?

treliac

kai666 wrote: »

But you haven't given away £50,000. You would have paid it what ever type of mortgage you had.

However, you will pay a lot less interest overall if you are able to clear the capital over a shorter term.

storeton

So you get your £180k intrest only mortgage over34 years
Now you need a savings vehicle to get you that £180K in 34years
It used to be a endowment with life assurance attached for tax relief in the good old days
Since the endowments have become crap,what's out there?
storeton:exclamati

Thrugelmir

storeton wrote: »

So you get your £180k intrest only mortgage over34 years
Now you need a savings vehicle to get you that £180K in 34years
It used to be a endowment with life assurance attached for tax relief in the good old days
Since the endowments have become crap,what's out there?
storeton:exclamati

Very little, as interest only mortgages are increasingly being charged a higher rate of interest than repayment by the major lenders.

Effectively encouraging people to take the repayment option.