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UKs biggest lender ends IO mortgages without evidence.
Comments
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RenovationMan wrote: »So if we strip out the Repayment Part (£1022.73) we have:
Repayment Mortgage (with repayment part stripped out): £573.75
Interest Only Mortgage: .............................................£573.75
Those figures look identical to me and so my statement:
"Strip out the repayment part of the mortgage and both [IO mortgage & Repayment Mortgage] will cost the same amount."
Is valid, is it not?
Certainly not if you do that one month later. :hello:
The only way the interest component would be the same is if the lender only recalculates the interest/repayment ratio once a year. If you strip out the interest component either side of that recalculation date, then you'll get different answers for the repayment mortgage. Of course, the interest component of the IO mortgage will stay the same, unless any capital repayment is made.
The more I look at your replies, the less sound your reasoning becomes.
The other flaw in your calculations is that if you were on a repayment mortgage for the past year, instead of the IO one, then I doubt very much if the interest component of your repayment mortgage would be £573.35 anyway.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
i've actually seen an argument against this and it does make sense.
it says pay back your mortgage but allow for part of those funds to go into your ISA and also your pension.
if you pay everything you save into your mortgage it leaves you nothing to contribute into your pension or ISA each month, which is very important.
this is all person specific but it does make sense depending on age, circumstances, spare cash available etc
Very sensible. It's all about balance and about working out the best option. If you want to play it safe, I don't think anyone would argue that a repayment mortgage is the way to go (prefereably one with some flexible options available - interest rate and other clauses permitting).
I have an idea, to add to wotshat's one a little earlier. It's call the Lotteyeowe mortgage.
You borrow the money to buy a house, and you only pay the interest - £5 per week which buys you 5 Lotto tickets. Any winnings are automatically used to make capital repayments on the mortgage. In the very unlikely event that the capital hasn't been paid off at the end of the mortgage term, you get one last chance with a £100 each way bet on a Nag of your choice.
I wonder if Northern Rock would be interested ?30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
i've actually seen an argument against this and it does make sense.
it says pay back your mortgage but allow for part of those funds to go into your ISA and also your pension so to plan for retirement when you can.
if you pay everything you save into your mortgage it leaves you nothing to contribute into your pension or ISA each month, which is very important bfore you get too old.
this is all person specific but it does make sense depending on age, circumstances, spare cash available etc
Indeed, but I should be mortgage free by 45-47, I will have 20-18 years to put in the equiverlent of £1200PM (today rate so inflate that by 10-12 years) when I am mortgage free. (that exludes or normal savings also)
Even without interest at todays pay in value that would leave me £259K cash in todays terms.
I then have my 5 bed detached to downsize. At todays value I could downsize to still a reasonable size 3 bed or 2 bed bungalow and take out £100K+.
I will be happy with £359K kitty. But I will more than likely retire at 60-58 when the pot should be around £300K.0 -
it wasn't criticising your plan. i've seen people on here calling people who don't plough all their cash into their mortgage 'debt junkies' just because they're planning for retirement at the same time. it's much easier to grow a retirement investment 'pot' from an early age than starting when you're 50-55. i also appreciate that many people don't like the concept of a pension fund.Indeed, but I should be mortgage free by 45-47, I will have 20-18 years to put in the equiverlent of £1200PM (today rate so inflate that by 10-12 years) when I am mortgage free. (that exludes or normal savings also)
Even without interest at todays pay in value that would leave me £259K cash in todays terms.
I then have my 5 bed detached to downsize. At todays value I could downsize to still a reasonable size 3 bed or 2 bed bungalow and take out £100K+.
I will be happy with £359K kitty. But I will more than likely retire at 60-58 when the pot should be around £300K.
it's all down to people's preferences and circumstances though.0 -
it wasn't criticising your plan. i've seen people on here calling people who don't plough all their cash into their mortgage 'debt junkies' just because they're planning for retirement at the same time. it's much easier to grow a retirement investment 'pot' from an early age than starting when you're 50-55. i also appreciate that many people don't like the concept of a pension fund.
it's all down to people's preferences and circumstances though.
It's alright mate I never took it as a criticism, as you can see I like to be in control of my money. If it does not work out I only have my self to blame. But I prefer that to getting to the age, not going to plan (say unlucky and retire in a bust) and blaming someone else.0 -
It's alright mate I never took it as a criticism, as you can see I like to be in control of my money. If it does not work out I only have my self to blame. But I prefer that to getting to the age, not going to plan (say unlucky and retire in a bust) and blaming someone else.
It seems a very sensible plan to me, hope it works out, can't see how it will not. Although someone will be along in aminute to tell you should buy silver insteadChuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
chucknorris wrote: »It seems a very sensible plan to me, hope it works out, can't see how it will not. Although someone will be along in aminute to tell you should buy silver instead
Or more property.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
your plan works though because by over paying you're freeing up repayments that would have gone to pay interest but now is going to pay capital.It's alright mate I never took it as a criticism, as you can see I like to be in control of my money. If it does not work out I only have my self to blame. But I prefer that to getting to the age, not going to plan (say unlucky and retire in a bust) and blaming someone else.
you can change that approach at any time because you have cash flow. some people are stuck when they repay large cash sums to their mortgage because they don't have use of that cash any more or the income generated from it.0 -
your plan works though because by over paying you're freeing up repayments that would have gone to pay interest but now is going to pay capital.
you can change that approach at any time because you have cash flow. some people are stuck when they repay large cash sums to their mortgage because they don't have use of that cash any more or the income generated from it.
If you are self-employed or a contract worker, then a flexible mortgage is almost a must in my opinion. The ability to overpay when you wish, and by as much as you wish, is not only useful, it can make the purchase of your property quite a lot cheaper. I was overpaying via regular monthly overpayments. When the credit crucnh started, I wanted to make sure I wasn't too exposed to issues with access to my savings, so I made a couple of fairly large overpayments which massively reduce the outstanding balance on my mortgage. In reality, it probably didn't make much difference, as most of those lump sums were being used to offset the mortgage anyway.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
In reality, it probably didn't make much difference, as most of those lump sums were being used to offset the mortgage anyway.
Ah, but it is sensible anything over £16K in savings means should the worst happen (lose job) you get nothing.
So making sure your savings offset gets paid in to you mortgage account rather than sitting in your saving account is a must for sensible planing. (We trigger the savings account at £10K as soon as we hit that we send £7K to go in to the mortgage account, leaving a small gradually increasing buffer in the offset)0
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