Advice - interest only

secreticicle

Hello,

As interest rates are rising and I am a v.skint first time buyer where every penny counts - I thought I might get an interest only mortgage for the first couple of years. I would hope in two years time to be earning more and to be able to begin repaying. I'm still early twenties so it's not the end of the world if I end up starting a 25 repayment mortage in two years.

Can anyone suggest a good buy? I need 100K mortgage, have 100K to put down.

What kind of repayments would I be looking at?

xx

lisyloo

Can anyone suggest a good buy?

Cash or gold, perhaps equities.

Not property.
Really bad time to buy in my opinion.

lisyloo

OK, now we've got that out of the way.

What is your salary if you don't mind telling?

It doesn't matter whether you think your interest only plan will work, what matters is whether a lender will lend you the money.

If you tell us what you are earning then we'll be able to say whether you it's going to be possible to get a mortgage or not.
Note that it is not the loan to value that is important here, it is the ratio of your income to the mortgage.
The lender wants to be sure you can pay it back.

secreticicle

20K a year...

lisyloo

OK - your income is £20K and you are looking for a £100K mortgage.

This means you are looking at a 5 * salary mortgage.

This is beyond what most people and lenders would consider affordable.

I think you will find that most of the high street lenders will not consider lending you that much.

It is pretty easy to calculate repayments for interest only.

Let say you get a rate of 4.5% (which is a competitive rate) then you are looking at:

£100,000 * 0.045 which is £4500 annually.
which is £375 per month.

If you really want to go ahead then your best bet is to take to a mortgage broker and see if they can find you a lender (I don't think most of the high street ones will do 5 * salary to be honest).

Personally I think the market has peaked and we will see stagnating prices or falls.
In my opinion it is not a wise time to buy property as there is a risk of price falls.
Also further interest rate rises are expected (but not many).