Moving to interest only

Bob_Jones_2

I want to reduce the amount I pay myself for a period to help get a new project off the ground. I have called the bank and they want me to jump through quite a few hoops to change the mortgage to interest only including going to an underwriter again.

What reason would they have to stop me moving? I know they would like to ensure that a repayment vehicle is in place but on what basis could they refuse it?

Lender is A & L.

_Andy_

IO reflects higher risk to the lender.

Thrugelmir

Income perhaps?

Cannon_Fodder

"pay yourself" - if the mortgage was originally self-cert, the whole can of worms might be being re-underwritten.

Bob_Jones_2

Cannon_Fodder wrote: »

"pay yourself" - if the mortgage was originally self-cert, the whole can of worms might be being re-underwritten.

Wasnt self-cert. I am a director of a limited company.

I appreciate the extra risk to the lender but it is marginal. The LTV is 60% and there are 22 years to go on the mortgage.

Thrugelmir

Bob_Jones wrote: »

Wasnt self-cert. I am a director of a limited company.

I appreciate the extra risk to the lender but it is marginal. The LTV is 60% and there are 22 years to go on the mortgage.

However your income is dependent on the financial performance of the Company.

Any underwriter would therefore be questioning why you wish to change the basis of your mortgage. Why should the mortgage company shoulder the risk of your "venture". Why doesn't the Company itself secure funding.

Bob_Jones_2

Thrugelmir wrote: »

Why doesn't the Company itself secure funding.

If only it were that simple.

Thrugelmir

Bob_Jones wrote: »

If only it were that simple.

Then maybe its no wonder you are being asked to jump through hoops by the underwritering team.

Leon_W

You are all going on about risk to the lender. Where ? There is no risk in this case.

It's pretty simple. If Bob fails to make payments the lender will sell his house and get its' money back. The only one taking a risk is Bob, who is, I presume, a fully grown adult that has weighed up the pros and cons.

In cases like this I think it's generally a smoke screen by the lender to charge a fee, jack the rate, or do both.

Bob_Jones_2

Leon_W wrote: »

You are all going on about risk to the lender. Where ? There is no risk in this case.

It's pretty simple. If Bob fails to make payments the lender will sell his house and get its' money back. The only one taking a risk is Bob, who is, I presume, a fully grown adult that has weighed up the pros and cons.

In cases like this I think it's generally a smoke screen by the lender to charge a fee, jack the rate, or do both.

I have no issue them doing due-dilligence as it is really an !!! covering exercise should I run into issues down the track. I am just surprised at the process they want to go through. I was actually going to start overpaying but I have a unique opportunity in my business and its going to need to preserve cash for a period to make the most of it.

I feel that banks are getting worried that interest only mortgages will cause them issues down the track as people come to the end of the term but dont have a repayment vehicle. We all know what this culture is like "its not my fault for not saving its the banks fault for not checking that I wasnt saving. Im going to sue!"

VIGILANT22

Increase borrowing....decrease payments.....

"Going on about risk"!.... "get a new project off the ground".....

and if the new project doesn't get off the ground??

Just exactly whose money is being used here?...Don't they have a right to do a risk assessment?

It costs lenders more money to repossess than it does to carry out a risk assessment/responsible lending.

When are people going to realise they are borrowing at the discretion of the lender!