Is it possible to get an interest only mortgage now?

yesway

We are currently on a lovely 2% over base tracker but want to switch to a 5 year fix for security. We are on a tight budget and want an interest only mortgage and I have started the process with HSBC at 3.94%.

However, they are not happy with our plans for paying off the capital which are these:

1. In five years my husband's company will be sold and he has 3% shares in it. His stake is currently valued at 80% of the debt so in 5 years there should be no problem paying off that and we'll have a tidy sum left over.

2. We will both still be earning and can make capital repayments of plan A fails. (My husband took a big pay cut to work for this company - hence the tight budget).

3. When my parents are both dead (hopefully far from now) I will inherit more than the debt.

However, HSBC is not happy with 1 or 2 and I'm pretty sure 3 isn't going to work either.

The alternative we are left with is to set up a repayment mortgage and pay the extra from our savings. But this will wipe out our savings in 5 years.

Any ideas?

_Andy_

Depends on LTV, you might be able to look at other lenders.
And yes 3) won't work with HSBC.

If you want to go with HSBC you will need to be on capital repayment.

yesway

Thanks Andy. Our LTV is about 50%. Are other lenders much easier to deal with then?

dimbo61

Can you not extend the term so that you can afford a repayment mortgage
The 5 year deal at 3.94% is very good , what is the fee ?
Its all about affordability and all lenders must now ensure that you can repay the loan over the term or have repayment vehicle in place.
First direct have some good Interst only mortgages but you need a repayment vehicle !

Thrugelmir

If you are on a tight budget. Then affordability will be an issue for any lender.

How much is outstanding on your mortgage and what is your household income?

yesway

We owe £387,000 and our joint income is £120,000 at the moment. The tight budget comes from expensive childcare and service charges for the flat we live in (we have no other debt).

What kind of repayment vehicle could we get that would be affordable? It is very frustrating as we only intend to be interest only for 5 years (never have been before) will almost certainly pay it all off after that and if not will re-start making capital repayments.

yesway

The fees are good £99 for setting it up and £450 odd for valuation. They cover conveyancing costs.

Thrugelmir

yesway wrote: »

We owe £387,000 and our joint income is £120,000 at the moment. The tight budget comes from expensive childcare and service charges for the flat we live in (we have no other debt).

HSBC having received the request to go onto an interest only basis. Most likely take the view that you are living a lifestyle you cannot afford considering the level of your income.

You've plenty of equity in your property to get control and resolve your personal finances yourselves.

yesway

We have a strict £110 a week supermarket budget for feeding 6 of us and our nanny.
We haven't had a holiday abroad in 3 years.
We now only go out for birthdays and anniversaries.
We have four young children and a nanny is the most economical way of providing childcare.
We are not living the high life.
London is just expensive.

Thrugelmir

yesway wrote: »

We have a strict £110 a week supermarket budget for feeding 6 of us and our nanny.
We haven't had a holiday abroad in 3 years.
We now only go out for birthdays and anniversaries.
We have four young children and a nanny is the most economical way of providing childcare.
We are not living the high life.
London is just expensive.

Not of any concern or interest to an underwriter.

Bluntly put, living in London is your choice.

My comments aren't personal views. As lifestyle is a personal choice. A business view is far more pragmatic and direct.

_Andy_

At 50% LTV this is possible via other lenders.