Still Possible to Secure Interest Only??

Meeper

Having a mortgage run permanently on an interest-only basis means that you might as well just be renting.

Wh05apk

Meeper wrote: »

Having a mortgage run permanently on an interest-only basis means that you might as well just be renting.

Effectively you are renting, in that you will never own the property, but in the long run, your mortgage should be a lot cheaper, rents rise roughly in line with inflation, assuming interest rates steady, then mortgage should remain fairly steady.

kingstreet

I echo the thoughts and views of the others. Not addressing the issue of how you repay the capital into another five year mortgage term appears foolhardy. I would caution you against this.

Each year that passes is one less year to start to address the capital repayment. It's pretty much nailed-on now that you won't be able to mortgage past retirement age, so you can't simply keep on moving the end-date indefinitely.

If you are adamant on this action and you understand the potential risk you are taking, there are lenders offering interest-only mortgages with no repayment vehicle. The maximum loan to value is restricted to 70%-75% of the property value and you are close to this. It won't take much of a down-valuation for your plans to fall apart. I accept what you say about your neighbours, but this is a strange market and surveyors are incredibly cautious.

There are around twenty lenders with five year fixed rates, some having geographical restrictions and others who may say they accept this business on a sourcing system but choose not to take cases when approached.

Abbey, Accord, Aldemore, Barnsley BS, BM Solutions, Cambridge BS, Clydesdale, GE Money, Halifax, HSBC, Leeds BS, Loughborough BS, Manchester BS, Newbury BS, Newcastle BS, Post Office Mortgages, Principality BS, Progressive BS, Scottish Widows Bank, Skipton BS, The Mortgage Works, Yorkshire Bank and Yorkshire BS.

OTT perhaps, but if you approached me I would not do the mortgage for you. I expect the other advisers would do the same.

Meeper

kingstreet wrote: »

if you approached me I would not do the mortgage for you. I expect the other advisers would do the same.

I would do the transaction but explain all of the potential pitfalls and the client would be signing a number of disclaimers and statements to declare that he understands exactly what he is doing and that I have advised against that particular course of action.

originalmiscellany

Fix long term, capital and interest - at the best rate you can get. Check any early repayment charges, how much you can overpay etc.
If and only when, your business takes off you can consider making decent overpayments, but at least in the current state, you'll be in a position to whittle down the mortgage a little bit at a time.
Interest only is as others have said like renting but with no real benefit to you.

Smokeysimon

Thanks for all the advice - I will be looking into all the options and take on board your comments about the risks I am taking, however I feel I understand these risks. It is just a capital repayment does not really suit me at this time.

Let me expand - In mid 2008 I entered into a highly profitable business that has been established for over 30 years. As we know the world basically started to fall apart at that time and although we have always remained profitable (the company has survived 3 previous recessions after all) we have really started to notice an increase in business again.

Although there are future risks like a double dip recession I remind myself that even in the most dire times we have always remained profitable and I have to say the outlook looks fair to middling over the long term! Because of this I really want to keep payments as low as possible over the next couple of years so that as business recovers I can rework my situation at that time.

As to renting, I bought the house in 2005 for 177,000 and with a lot of elbow grease it is now comparable to my neighbours whose house sold only 6 months ago for 247,500! Even given a sizable decrease on this figure leaves me in what I feel a more favourable position than I would have been renting and I doubt I would be able to find a three bedroom house like mine with a rent comparable to my interest only payments.

Seriously though – thanks again for all the advice. I certainly will be looking into all options and to be honest you guys and girls have really made me think twice about trying to continue with an interest only mortgage.

I will keep you posted!