Repayment vehicle interest only mortgage ING direct

Kraecki

I am currently in the process of applying for a mortgage with ING direct.

It is a lifetime tracker interest only mortgage.

Interest will be c. £450 a month but I will pay in at least £1000 per month. So will make decent overpayments.

Now they have told that they require proof that a repayment vehicle is in place.

I have two pension schemes from previous employments but no money is paid into these schemes anymore.

I have started a new job in August and recently passed my probationary period. I could not sign up for a pension with my new employer before I passed this. However, I won't have official proof (as in a letter from the pension provider) that I am signed up for the pension by the end of November which is too late.

Is there any other way of putting a repayment plan into place sooner than that? I know that I could use ISAs. I am not sure what kind of proof ING will exactly need.

Maybe somebody can help. That would be very much appreciated.

originalmiscellany

I think they'll be looking for something other than a pension, which really is there to help you when you are old to live, and not pay off a mortgage. They would want to see a regular savings account, where a set amount is paid in every month, something that shows you can pay off at the end of your interest only.

Rules are a LOT tighter now than they ever were/have been - they will ask for cast iron proof and if not given you could well be rejected.

When I took my mortgage out a few years ago, all I had to say was "I'll save a lot", here;s a financial breakdown of what I currently spend with proof and my planned savings and a theoretical saving scheme in place. They took it, but it's hard now sadly.

Kraecki

Thanks for getting back with me. Obviously I have saved up the deposit over 5 years and I have three cash ISA and one stock ISA account. But the balance one these I will use to pay the 25% deposit. They told me that it is FSA regulation which makes sense. Do I still have time to set up a regular savings plan or is that too late now?

HappyMJ

Kraecki wrote: »

Thanks for getting back with me. Obviously I have saved up the deposit over 5 years and I have three cash ISA and one stock ISA account. But the balance one these I will use to pay the 25% deposit. They told me that it is FSA regulation which makes sense. Do I still have time to set up a regular savings plan or is that too late now?

You can set it up on the day you take out the mortgage. As long as you detail how it's going to repaid.

As far I as I recall though increasing pension contributions is tax efficient. You then get a lump sum on retirement. That lump sum can then be used to pay off a mortgage and then you live on an annuity purchased with the remainder of the pension funds. So not sure where last poster comes from saying that pension must only be used for living costs. The lump sum component can be used for a final payment on a mortgage.

originalmiscellany

that comment was more me being utopian than real!
Most people would want their pension to kick in when they have paid their mortgage off - in my mind it would be a bad place to be when you are 65 and your pension of say 5k all goes on paying off a mortgage.

When you are retired (40 years plus at the going rate for me) I think we'll be finding it hard enough without say 40% of our pension going on paying a mortgage. That was what I tried (and failed) to say.

Sorry if that's caused any confusion.

Thrugelmir

HappyMJ wrote: »

As far I as I recall though increasing pension contributions is tax efficient. You then get a lump sum on retirement. That lump sum can then be used to pay off a mortgage and then you live on an annuity purchased with the remainder of the pension funds. So not sure where last poster comes from saying that pension must only be used for living costs. The lump sum component can be used for a final payment on a mortgage.

When you calculate how much has to be contributed to generate a larger enough lump sum to clear the mortgage, i.e. 25% of the pension pot. Then the majority people realise its not a viable plan for them.

That's why around 96% of all new mortgages are now on a repayment basis. As the alternatives (such as endowment policies) have too often failed to deliver.

Kraecki

Ok well I will pay off the mortgage anyway a lot earlier without the need of my pension. It is more about how I prove to them that I save up for it. Do you think it would be sufficient if I open two regular savings account where I pay in £250 each month. So £500 in total per month.

Would for example use one with Barclays and then one from another bank (sorry I am not allowed to post a link but I mean one of these regular monthly saving accounts)

Thanks

Thrugelmir

Kraecki wrote: »

Ok well I will pay off the mortgage anyway a lot earlier without the need of my pension. It is more about how I prove to them that I save up for it. Do you think it would be sufficient if I open two regular savings account where I pay in £250 each month. So £500 in total per month.

Might as well have a repayment mortgage from the outset. You can still make overpayments as and when you like.

Kraecki

Yes sure but the interest rate is much worse. I would get 2.39% + Bank of England base rate. And it is a lifetime tracker. Or do you know any better offers?

AJK_3

Kraecki wrote: »

I am currently in the process of applying for a mortgage with ING direct.

It is a lifetime tracker interest only mortgage.

Interest will be c. £450 a month but I will pay in at least £1000 per month. So will make decent overpayments.

Now they have told that they require proof that a repayment vehicle is in place.

I have two pension schemes from previous employments but no money is paid into these schemes anymore.

I have started a new job in August and recently passed my probationary period. I could not sign up for a pension with my new employer before I passed this. However, I won't have official proof (as in a letter from the pension provider) that I am signed up for the pension by the end of November which is too late.

Is there any other way of putting a repayment plan into place sooner than that? I know that I could use ISAs. I am not sure what kind of proof ING will exactly need.

Maybe somebody can help. That would be very much appreciated.

From ING Direct's website:
Interest only mortgages & acceptable repayment plans

Interest only mortgages are available up to a maximum of 75% loan to value where there is a suitable repayment plan in place./p>
The plans listed below are acceptable to us

• Endowment
• Pension
• ISA
• PEPs
• Unit Trusts
• Managed share portfolio of listed companies
• Sale of property (maximum 60% LTV, minimum £150,000 equity)

Our interest only mortgages are available up to a maximum of 75% LTV
You will be required to provide details including name of the plan provider, policy number, name of policy holder, maturity date, forecasted maturity value, current value and monthly cost.
If you do not have an acceptable plan in place we can only offer a repayment mortgage.


They do not ask for the documentary evidence just details of what plan is in place

Kraecki

AJK wrote: »

From ING Direct's website:
Interest only mortgages & acceptable repayment plans

Interest only mortgages are available up to a maximum of 75% loan to value where there is a suitable repayment plan in place./p>
The plans listed below are acceptable to us

• Endowment
• Pension
• ISA
• PEPs
• Unit Trusts
• Managed share portfolio of listed companies
• Sale of property (maximum 60% LTV, minimum £150,000 equity)

Our interest only mortgages are available up to a maximum of 75% LTV
You will be required to provide details including name of the plan provider, policy number, name of policy holder, maturity date, forecasted maturity value, current value and monthly cost.
If you do not have an acceptable plan in place we can only offer a repayment mortgage.


They do not ask for the documentary evidence just details of what plan is in place

But you have to provide details, so I need something in place.