Still Possible to Secure Interest Only??

Smokeysimon

Hi all,

Long time reader but wondered if anyone could throw some light on my situation as I was wondering if it was still possible to secure an interest only mortgage in my scenario?

We have currently come out of contract on our current interest only mortgage of £155,900 and are looking to secure another interest only mortgage for preferable a 5 year fix interest period given the current financial climate.

I have called Santander and HSBC but they have said that only a repayment mortgage would currently be available as we do not meet the criteria on interest only

Our combined salaries are £45,150.00 and I estimate our properties value at £225,000 given that our neighbours sold 6 months ago for £247,500 (we are part of a terrace).

If anyone could offer any advice it would be greatly appreciated as to be honest it has shocked me to see that repayment might be the only option at this time. Whilst this is an avenue we can afford I would rather stick to the interest only.

Thanks in advance.

Smokeysimon

P.S. We both have excellent credit ratings and no outstanding debt.

Leon_W

I am unclear.

Who is your current lender and what is the mortgage amount ?

Wh05apk

Do you have a repayment vehicle? if not lenders will generally only lend i/o with no repayment vehicle where the main property has more than a certain amount/% of equity.

Smokeysimon

I am currently with Northern Rock with an outstanding mortgage of £155,900.

BoGoF

I'm curious as to why you want another 5 year interest only.

Surely with interest rates so low you should be looking to pay off some of the capital?

As already asked, do you have a repayment vehicle?

Smokeysimon

At the moment I do not have a repayment vehicle.

To be honest I am trying to form in my own mind the best avenue to take in regards to repayment vs interest only and fixed rate vs variable etc.

I opted to ask about the 5 years fixed rate as with the advent of constant news on the interest rates rising (and that’s be honest they can only go one way!) I am concerned that a shorter tie in period could see me coming out of an arrangement when mortgage rates are a lot higher.

I work in a business that is doing well at the moment however we are really hoping for better things over the next couple of years so my hope was to tie into a long interest only mortgage with the option to overpay as and when I can afford it.

Wh05apk

Few if any lenders will accept that now, I would suggest repayment, but if you are looking at keeping your costs dowm take it over as long a term as possible, effectively that will be close to interest only, you can then over[ay to reduce the term.

Thrugelmir

Smokeysimon wrote: »

We have currently come out of contract on our current interest only mortgage of £155,900 and are looking to secure another interest only mortgage for preferable a 5 year fix interest period given the current financial climate.

In another 5 years time the interest landscape could have changed significantly. While the rate of interest is important. Reducing the capital balance will save interest paid in the longer term.

Smokeysimon

Thanks for the advice guys. I am so jealous of my Dad who came out of contract on his mortgage and ended up paying 0.5% above base rate!!! God could I eat away at my outstanding capital then. Why is it the richer you are the easier it seems to become When my tie in period ended with Northern Rock I went from 4.99% to about 4.74% - wo hoo...

theduke2011

If you do not have a repayment vehicle in place(or you're not looking to set one up), any adviser would have no option but to recommend a Capital & Interest mortgage. Most lenders will not accept overpayments on the mortgage as a suitable repayment vehicle. You said you plan to make overpayments in the future - how do you know you'll be able to afford to do this in the future?
Santander probably declined your request because you told them you have no vehicle in place (e.g. isas, pensions, endowments etc etc) and therefore do not meet their criteria.

Regards,
D