Interest Only/Repayment split could be better

maggiemayhem

Looking at term (23 yr) offset mortgage for £80,000 from lender.

The house is worth between £300,000- £350,000.

My husband earns a salary that is slightly below half the value of the loan. At present he does not have much in savings but any debt he does have (which is very minimal) can be cleared with this. He also has a good credit rating.

The mortgage will be in my husbands name only.

On the initial phone call with the advisor she asked him how he would pay off the capital at the end of the term (she told him that any endowment/savings I have cannot be taken into consideration for paying off capital - we had not realised this) .

He told her he had an endowment that should come in about £20,000 in 4 years time and money in shares. She told him that his shares could not be taken into consideration and the product she offered was an offset mortgage for £20,000 (which is interest only) and repayment term tracker for £60,000 (which is repayment). We would prefer the split to be closer to what we requested so my husband said he would think this over and it was left that he will have to start the application again.

Though currently not much has been saved He could save £2,000 a year for this. We want to go with this lender as their rates are very competitive .Any advice in general on this and how to handle this when next talking to them would be greatly appreciated.

maggiemayhem

Any thoughts?

Annisele

I haven't looked at your previous posts, but is there a reason the mortgage is going to be in your name only?

Do you have endowments/savings in your name only that could repay the mortgage? Could you gift them to your husband?

Thrugelmir

Why an offset? When little in the way of savings.

maggiemayhem

Annisele , Thrugelmir - Thanks for the replies.

I would like to gift my savings to my husband but I was not sure if there was any tax implications when doing this with your spouse? does anyone know ? also I did not know you could gift your endowment policy? does anyone know how I would initiate this?
We are going for an offset for a number of reasons. The difference between the offset and the repayment tracker is minimal (.2%) ; We intend to save quite a bit over the next few years; The other tracker is repayment only.

Thrugelmir

Transfers between spouses are exempt from tax. Though the Official Receiver or a Court has the power to reverse the transaction in certain circumstances.

As your husband can easily afford the mortgage on his income alone. Having your name on the mortgage and deeds would make life far easier.

getmore4less

Who is the lender?

Why ask for interest only and not repayment?

Were regular overpayments not an acceptable answer to paying off the debt?

Why not a joint mortgage?

Unusual for a lender to allow part offset part tracker are the rates the same or is the tracker part at a lower rate?

Moving money between spouses(and civil p) do not have any tax implications.

maggiemayhem

Thanks for the replies.

We would be happy to put my name on the deeds/ mortgage but were unsure of how this is done and how long it would take - (currently on an SVR of 4.7 and want off it asap). How could this be done as quickly as possible?

We are going for an interest only because : it keeps set payments down and with selected products we can offset/reduce the capital as we see fit or are able.

It sounded like we were offered term offset tracker(£20,000) , term repayment tracker (£60,000) and the rates were the same for both (offset rate) but we need to clarify this.

We did not mention overpayments as possible vehicle we do not want to be tied in to set formal overpayments as part of the written condition of the mortgage. Would saving into the offset account normally be considered a possible vehicle.?

Thrugelmir

maggiemayhem wrote: »

We did not mention overpayments as possible vehicle we do not want to be tied in to set formal overpayments as part of the written condition of the mortgage. Would saving into the offset account normally be considered a possible vehicle.?

Mortgage T&C's aren't negotiable if you want the mortgage then you'll have to accept the terms that are offered. Any lender would be deemed irresponsible and culpible in the current enviroment to even consider it.

I would advise against approaching Lloyds for a mortgage.

maggiemayhem

Thanks for the reply.
Thrugelmir - I'm not sure if I worded what I was trying to say properly - what I meant was that I did not want a mortgage where as part of the written contract I must make an overpayment of £x each year . None of the products I am looking at currently have this in their terms and conditions. Just out of interest why not Lloyds?

Thrugelmir

Lloyds are now reviewing their interest only customers on an annual basis to ascertain whether the borrower has a vehicle in place to repay the mortgage. Appears this will be documentary evidence not verbal.

I would hazard a guess that Lloyds will penalise customers that do not comply in the future. To reflect the additional risk and cost to the bank.

HBOS concurrently is capping mortgage terms to aged 75. So very slowly the noose is being tightened on lending.