interest only mortgage

rannoch

I'm trying to help someone work their finances, but not having been in the mortgage market for a long time the mortgage setup seems very odd.
You used to get interest only mortgages with an endowment insurance policy. The matured endowment would pay for the capital.
My friend has told me that his mortgage is interest only - that's it, no capital repayments.
I can't believe that a mortgage lender would have this type of mortgage. How can we check the terms and conditions.

HappyMJ

They are still available. You need to have plenty of equity. I need to keep the balance at 75% LVR to have interest only. The capital to be repaid on sale of house and no later than 5 years after retirement.

Badger_Lady

Mine is interest-only... my LTV is currently about 90% but I've had the mortgage for nearly 4 years.

I choose when I want to pay capital - at times when I'm earning well, I add a monthly amount onto the interest, and when I have a lump sum I pay it off with that (within my 'early repayment' limits). When my financial outlook is less certain (e.g. changing jobs or taking on a new financial responsibility), I revert to my standard interest-only again.

Yorkie1

Surely ,interest only mortgages have always been with no repayment of capital until the end of the term. It's just that in the past, the endowment was the expected vehicle to be used for the repayment of capital at the end of the term. That has not changed, it's just that a wider range of vehicles are now available / permitted as the plan to repay the capital.

I read on here that lenders increasingly require evidence of the repayment vehicle before granting the mortgage these days.

Charlton_King

You just have to have a savings plan or some other provable scheme for eventual repayment of the original amount borrowed.

In reality, most people make 'overpayments' as they go along together with the required monthly interest payment, either every month or as and when they come into some cash.

Evilm

When we had one it was linked to my husbands pension lump sum. They ensure you have something with which to pay it off but no longer make you buy an endowment.

magpiecottage

Interest-only mortgages with no specified repayment vehicle have been around for at least 20 years. Nowadays the lender is required to include a prominent reminder that it is interest only and a repayment vehicle must be arranged each year.

rannoch

Thanks for the information.
My friend doesn't seem to have taken out any provision to pay back the capital, and seems to think that he can sell the house sometime in the future, pay off the mortgage, and downsize to a property where the balance of the previous house will pay it completely.

kingstreet

rannoch wrote: »

Thanks for the information.
My friend doesn't seem to have taken out any provision to pay back the capital, and seems to think that he can sell the house sometime in the future, pay off the mortgage, and downsize to a property where the balance of the previous house will pay it completely.

He can do exactly that. However a lender is less likely to accept that as a repayment method today than it would three years ago.

Venetianskyblue

Hi, I have parents with the same problem and don't really know how to help, so (useful) advice would be gratefully received.

My Father had some mortgage arrears a few years ago and went to see someone (a financial advisor I presume) who 'helped' him to get a second mortgage with the same mortgage company he was with (Bradford and Bingley). My Father wanted to raise capital to pay off 10k arrears on a 35k mortgage and buy a business.

Basically the business went 'belly up' and my Father ended up with no profit and an interest only mortgage which he was not aware he had until about 8 years ago. When we noticed and he queried it with Bradford and Bingley he was told he was too old to change it to a repayment mortgage as he could only have a term of 10 to 15 years. Yet, the term for the interest only mortgage is 23 years. He has no endowments, investments or savings to pay the mortgage off, which is now around £65k. The house is probably worth around £150k. The original mortgage started in 1985. The second mortgage was taken out around 1989/1990.
Both my parents are in their 60's bearing in mind the small amount owed and the value of the property would they be able to change to a repayment mortgage? My Father is on pension credit pays £160 per month and receives some help of around £150 per month.
Thank you

Thrugelmir

Venetianskyblue wrote: »

Hi, I have parents with the same problem and don't really know how to help, so (useful) advice would be gratefully received.

My Father had some mortgage arrears a few years ago and went to see someone (a financial advisor I presume) who 'helped' him to get a second mortgage with the same mortgage company he was with (Bradford and Bingley). My Father wanted to raise capital to pay off 10k arrears on a 35k mortgage and buy a business.

Basically the business went 'belly up' and my Father ended up with no profit and an interest only mortgage which he was not aware he had until about 8 years ago. When we noticed and he queried it with Bradford and Bingley he was told he was too old to change it to a repayment mortgage as he could only have a term of 10 to 15 years. Yet, the term for the interest only mortgage is 23 years. He has no endowments, investments or savings to pay the mortgage off, which is now around £65k. The house is probably worth around £150k. The original mortgage started in 1985. The second mortgage was taken out around 1989/1990.
Both my parents are in their 60's bearing in mind the small amount owed and the value of the property would they be able to change to a repayment mortgage? My Father is on pension credit pays £160 per month and receives some help of around £150 per month.
Thank you

Hi

Start a new thread. Tagging onto an old one means reading a load of irrelevant posts.

Thanks