Which mortgage, repayment,part n part or interest only?

shopaholicjules

Hi
I am in the process of selling my house, as yet I have yet to find somewhere else but carry on looking and hope I will find the right one soon.
I live on my own and will have a £35,000 deposit and looking to borrow 85-90,000.
What are people's views on the type of mortgage I should get. On the house I have now I have a endowment which is losing so interest only makes me cautious.
A repayment mortgage works out expensive for what I can afford, i could do it but would be pushing myself.
A part repayment, part interest sounds ok but I do not know the pros and cons.
Any advice appreciated.

P.S I don't really understand mortgages even though I have read loads, so any posts in nice plain english for me please.

Jules

shopaholicjules

Anyone have any ideas or advice please.

Jules

puddleduck

If you look to the left of the page, there's a menu item entitled "mortgages and homes". Click on it, and there are two things on that page that loads that you should read: "The Mortgage Guide pdf" and "Getting the best advice for free".

That should get you started in the right direction.

hth

shopaholicjules

Thanks
I have have a read through them but seem to be confusing myself.
Would people advise not going part repayment, part interest as I won't be paying anything off that part.
The reason it looks a better option for me is the monthly payments are more manageable.
At the moment I have a very small mortgage, only paying 130-140 pound a month.
Once I move, even putting the nearly 40,000 I have will still mean payments of over 400 per month.
Any advice please, my neighbour is buying my house and she is ready to proceed so I need to pull my finger out and start doing something about it.

Thanks
Jules

anniecave

If you only ever pay the interest on a loan, you are never actually going to own anything. And if property prices go down, you will end up losing even more money, as if you sell you will also have to make up the difference between what you bought and the value when you sell. That is the downside to repayment mortgages.
I don't understand what you mean by part repayment, part interest?
Why don't you look at what properties are available in your area? Also look at areas around where you live, as prices vary wildly between areas.
In my opinion it would be best long term to be on a repayment mortgage as that way you will be paying towards the value, so at the end of it all you will actually own the property.
I don't know where you live obviously, but in my area you can get a flat easily less than £100,000, so if you have a £35K deposit, your payments should be quite a bit less than £400 a month. In most areas around here you can't get a rented flat for less than that anyway, so if you can find somewhere that you can afford on your price range, then I would go for it.
Have you done an overall budget spreadsheet, how much you earn, how much you spend on different things etc? How much can you afford to spend on the mortgage? Can you find any other ways of cutting back. Like if I was struggling I would sell my car and use public transport.
There are lots of types of mortgage, but it's all borrowing, so only borrow what you need to!

shopaholicjules

Thanks for your advice. I understand what you are saying about only paying the interest on a mortgage and that i would always still owe.
The part repayment and part interest I was talking about is where I have seen these types of mortgage.
For example I am looking at spending 125,000, that's what the prices seem to be, I am constantly looking at houses, just haven't got any further then that. I would need a mortgage then of 80,000. I could have 40,000 say on repayment and the other 40 on interest only. This would make the payments more affordable and hopefully in the future circumstances will change and I can change it to all repayment but if not carry on with part and part.
You are right about cutting back but the other side of me says I want to live and enjoy and not live to just pay the mortgage and worry that I couldn't afford it.
I have a car but use this for work, I am a Social Worker so go on visits every day and not always in the local area, I have visits a couple of hours away etc.
I know that once I move the cost of gas/electric/council tax etc are going to rise but want and need to get out of the area I live.
personally I don't have any trouble here but it is not a good area and alongside this alot of the young people I work with are moving in aorund me. Don't get me wrong, i don't think i am any better than them, it can just make it very difficult if some find out where you live.

danjberry

part and part is fine and also when your wages go up in the future (hopefully) then you can alas switch later on down the line to all repayment or continue putting money aside to repay the interest only part when your term does come to an end. if that is best for your means then i would go for part and part then you are also reducing the risk as if you have all the mortgage on interest only

TEDDYRUKSPIN

Basically, it looks like you have fell foul on the interest only mortgage problem before. Personally, I hate interest only and would'nt definitely not recommend anyone to do this. If you do the interest only, only do it no more than 3 years and that's it. Go for capital repayments only.

If you can't afford capital repayment now, it means you are buying a house way too expensive for you!

shopaholicjules

Thanks for your advice and views.
I take on board what you are saying but with house prices being what they are now, I can't find anything that is less than than.
I am no longer with my partner so means I will be buying and paying the mortgage myself which obviously makes it expensive for me on my own.
I am keeping my endowment on as I see that someone has posted today that with profits are maybe going to go up a little, whichever way it is a savings plan and when this ends I will put the money to pay off some of the mortgage.
I would love a nice small mortgage but the reality is there are no houses to be able to do that with. I am even looking at those that need work but still they are not cheap by any means.
I think it is a situation lots of people are in when buying a house.
Some people may say stay where you are but the area si not good for lots of reasons and house prices may drop again her.
Jules