Interest only mortagage with no endowment - want to move house

jennieshrew

All very sensible really but my lender will now want evidence of an investment vehicle to repay the capital part of our mortgage before allowing us to remortgage. We dont have one and have just been paying the mortgage interest for the last few years. How do I go about getting an investment vehicle? Do they still sell new endowments? Google searches are failing me.

Burridge60

You say remortgage but that suggests changing lender?

Are you just taking a new product from your current lender or switching lenders?

jennieshrew

I want to move house.

I have just remortgaged to swap to a fixed rate with my current lender, stupidly. If I want to move house I am now tied to my existing lender but have to go through the whole credit score, affordability business if I want to move to a new property.

opinions4u

Make the new mortgage a repayment then. Simples.

Burridge60

jennieshrew wrote: »

............ through the whole credit score, affordability business if I want to move to a new property.

It is called "lending responsibly" so that we do not have another Banking Crisis and Banks cant be accused of letting borrowers over extend themselves.

An interest only mortgage is and always has been a high risk mortgage why did you embark on this mortgage without planning to repay it.

Thrugelmir

jennieshrew wrote: »

If I want to move house I am now tied to my existing lender but have to go through the whole credit score, affordability business if I want to move to a new property.

This has always been the case.

mcc100

Burridge60 wrote: »

why did you embark on this mortgage without planning to repay it.

No doubt because the mortgage adviser led the borrower to believe that house prices would keep on rising forever, that they could consider it cheaper than renting, and that they could always sell for a profit ........

Thrugelmir

mcc100 wrote: »

No doubt because the mortgage adviser led the borrower to believe that house prices would keep on rising forever, that they could consider it cheaper than renting, and that they could always sell for a profit ........

People need to accept a share of responsibility themselves for their decisions.

cymonguk

OP don't take the comments too personally here, people can be very judgmental, esp as they are anonymous to you.

The adviser who sold you the mortgage should have told you or gave you information on how to pay back the capital, as it stands when you reach 25 years you will need to find the original house value or forfeit it. How were you expecting to get the money together?

Simply put an investment vehicle is any method by which you put the money aside to pay for the capital cost (i.e loan amount, or house cost - deposit) at the end of the mortgage.

You could use anything really:

Endowment
Trust funds
Share funds
ISAs
Savings accounts
Property

You just need to show that you are putting away sufficient amounts to reasonably expect a return. So if your mortgage was for 100k you need to show that over the next 20 years you can reasonably expect to achieve that. i.e you need to be putting away 5k a year in cash.

Endowments are not some miracle, i.e you put in £3k a year and expect to get a big payoff, this led to lots of issues 15 years ago where endowments were missold.

You could try some of the low risk trust funds, but I would suggest you speak to a proper financial adviser who can give you better advice.

jennieshrew

cymonguk wrote: »

OP don't take the comments too personally here, people can be very judgmental, esp as they are anonymous to you.

The adviser who sold you the mortgage should have told you or gave you information on how to pay back the capital, as it stands when you reach 25 years you will need to find the original house value or forfeit it. How were you expecting to get the money together?

Simply put an investment vehicle is any method by which you put the money aside to pay for the capital cost (i.e loan amount, or house cost - deposit) at the end of the mortgage.

You could use anything really:

Endowment
Trust funds
Share funds
ISAs
Savings accounts
Property

You just need to show that you are putting away sufficient amounts to reasonably expect a return. So if your mortgage was for 100k you need to show that over the next 20 years you can reasonably expect to achieve that. i.e you need to be putting away 5k a year in cash.

Endowments are not some miracle, i.e you put in £3k a year and expect to get a big payoff, this led to lots of issues 15 years ago where endowments were missold.

You could try some of the low risk trust funds, but I would suggest you speak to a proper financial adviser who can give you better advice.

Thanks. I didnt take it too personally. Its easy for people to say !!!!!! are you doing but half the country have done what I did! I have rung my mortgage provider and they have told us they wont lend interest only on new property anyway - unless we give a 25% deposit. So we will have to go onto a repayment mortgage. About time too.

I am an accountant - its just not even funny is it! :rotfl:

somethingcorporate

You don't have to forfeit the house at all at the end of an IO mortgage, you would just have to remortgage.

Although you would be a fool to have not had any plans in place to repay an IO mortgage.