Advice re Interest only mortgage

pampam

If someone has not got any family responsibities and noone in particular to leave their estate to when they die could they just pay the interest on their mortgage until death?

ohmsoft

Technically yes - infact thats quite similar to how lifetime or equity release plans work.

Personally i think in most cases you would be better off renting.

jennifernil

We had a lifetime mortgage with Halifax and that is exactly how it worked. Ours was only a 2 year arrangement for £40000 so only 10% of the value of the house. We have now moved to Nationwide on a 2 year interest only deal at base rate minus 0.13% but the fee was £598 total. However as we have increased our borrowing to £150000 it was worth it for the lower rate.
We really only need the money for 10 months as OH will be getting a lump sum pension payout when he retires.
So I (as a non-taxpayer) will be investing the surplus at base rate plus 0.25% and paying the interest out of that.

Rick62

Yes, but how are you going to pay the interest when you retire? Bear in mind that most people hope to live another 20 to 30 years (or more) after they retire.

If you have any funds your priority should be to pay off the mortgage, if you don't you won't be able to afford the mortgage payments.

jennifernil

It would all depend on how much you borrowed and what your income was. They will not lend you more than you can afford to pay the interest on.

Rick62

Yes, but most peoples income drops when they retire, typically to a third or half if your lucky enough to have a final salary scheme, less for most people. If you can't afford the mortgage when you are working how will you pay it when you retire?

pampam

Thanks for your replies.
I was asking for a friend of mine who has no imediate family to leave his estate to.
I just think he may as well have as much cash in his pocket whilst he is here.
The sale of the property on his death would pay of any mortgage debt.
I will make some enquiries on his behalf.
thanks
pam