Interest only Mortgages - chelsea or Santander (repayment vehicle)

PeppaP

We've always had interest only mortgages in the past and have overpaid rather than had an explicit repayment vehicle in place. We've always been ahead with our overpayments so thats not been a problem. We're looking at re-mortgaging at the moment and see good deals from Chelsea and Santander on I.O.

Our house is worth £500 ish, we need to borrow £220 but we have high childcare costs for the next 2 years until our youngest goes to school and would like the flexibility of staying on interest only.

I called Santander with the intention of applying online and they asked a lot about our repayment vehicle. We have share ISA's which they said are not appropriate for a repayment plan and i need to come up with a repayment plan that meets their criteria before we can apply. Thing is i don't know what their criteria is and if chelsea will be the same. They cannot give that advice over the phone. Can anybody help as to what repayment vehicles will meet their criteria.

Does anybody have advice on Chelsea re i.o and if they are easy to deal with? It seems to me that santander don't really want to lend on an i.o basis but i may be wrong?

We've used mortgage brokers before - am wondering if its possible to re-mortgage on i.o without a broker. We've never actually set up a repayment vehicle in the past through any broker but this may be as a result of the credit crunch.

Many thanks for your help

System

I dont have a great deal of experience with IO, but I do know that lenders like a definate repayment vehicle in place, e.g. endowment, investments.

Have you considered a repayment mortgage with an extended term, say 30 or 35 years? You wont be paying much more than IO anyway.

shortchanged_2

Sign of the times I'm afraid. IO mortgages are not dished out so freely any more.

When you say you overpay your mortgage, does that mean you paying over and above what a repayment mortgage would be otherwise you are not really overpaying but just paying off the mortgage the same as if you had a repayment mortgage.

Why do you see an IO mortgage as better than a repayment mortgage?

System

Oh and stay clear of Santander, they generally have a poor reputation!

Chelsea are part of the same group as Yorkshire Building Soc (who I am with and have never had any problems)

Wh05apk

Not sure about Chelsea, but Abbeys criteria:

"
We allow interest only applications provided there is an acceptable source of funds to repay the capital at the end of the mortgage:

• For pure interest only mortgages the maximum term is 25 years
• If any of the loan is taken on an interest only basis, the maximum LTV for the overall loan is 75%

For applications with or without a funded investment vehicle, we will assess affordability on a capital and interest repayment basis and assume a repayment period of 25 years minimum. If the actual mortgage term selected is longer than 25 years with a funded investment vehicle, the longer term will be used."

They will accept "downsizing" so you could state that as an acceptable vehicle.

anoriginalusername

I've just taken a interest only mortgage with Santander.

In reality, they'd accept the following:

1) 'Sale of the property' as the 'repayment vehicle' IF you tell them you intend to sell the property after 25 years or something (this is for their compliance records, nothing at all binding of course).

2) Downsizing (as above).

3) A Key Facts illustration showing the projected worth of a stocks and shares ISA at the end of your mortgage term. Clarification: Even if you opened a plan, produced the illustration, reduced or closed the plan you originally presented to the lender, nothing would come of it.

* Note I am not advising or suggesting that you do anything like this, I am just trying to describe to you how far the 'repayment vehicle' criteria go. *

shortchanged_2

anoriginalusername wrote: »

I've just taken a interest only mortgage with Santander.

They'd accept the following:

1) 'Sale of the property' as the 'repayment vehicle' IF you tell them you intend to sell the property after 25 years or something (this is for their compliance records, nothing at all binding of course).

2) A Key Facts illustration showing the projected worth of a stocks and shares ISA at the end of your mortgage term. This means that they will accept it if you walk into a bank today, say you'll pay in £500 a month, get the appropriate illustration, then close the plan. Again, it is just for the bank's internal compliance.

Does this mean you have no intention of complying with the terms?

Credit-Crunched

anoriginalusername wrote: »

I've just taken a interest only mortgage with Santander.

They'd accept the following:

1) 'Sale of the property' as the 'repayment vehicle' IF you tell them you intend to sell the property after 25 years or something (this is for their compliance records, nothing at all binding of course).

2) A Key Facts illustration showing the projected worth of a stocks and shares ISA at the end of your mortgage term. This means that they will accept it if you walk into a bank today, say you'll pay in £500 a month, get the appropriate illustration, then close the plan. Again, it is just for the bank's internal compliance.

PLEASE PLEASE PLEASE do not listen to the irresponsible 'advice' above. The reason of a repayment vehicle to be in place and STAY in place is for your benefit, how would you feel 1 year before retirement having to find 220k or your home reposed, that is the harsh reality of an I/O mortgage.

Other than a PCLS or significant savings plan then i/o should be avoided, huge flaws in most so called repayment options.

-sell house - where will you live?
- inheritance - what if you are written out of the will, parents in a care home
- savings - uni fees for children etc use them up

if you can afford a repayment mortgage take that, if you cant then look at extending term or reducing mortgage size

anoriginalusername

shortchanged wrote: »

Does this mean you have no intention of complying with the terms?

Not necessarily... there is no mention of a repayment vehicle (or sticking to one) in the lending terms or contract.

anoriginalusername

Credit-Crunched wrote: »

PLEASE PLEASE PLEASE do not listen to the irresponsible 'advice' above.

Most of all please ignore the fool quoted in this post, another internet mortgage advisor..

I suggest calming down.

You should note that I did in no way advise that they do either. Simply based on my experience of just taking out an IO mortgage, I said what would be accepted and described the level of obligation when it comes to assessing these repayment vehicles.

Credit-Crunched

anoriginalusername wrote: »

I suggest calming down.

You should note that I did in no way advise that they do either. Simply based on my experience of just taking out an IO mortgage, I said what would be accepted and described the level of obligation when it comes to assessing these repayment vehicles.

Perfectly calm here, I am just highlighting the massive flaws in your 'advice' stating someone should have FKI and then they 'could' cancel it straight always would be deemed border line advice, and without a level 4 diploma in financial planning am FSA licence and a suitability report I would be careful what you recommend.

What is your repayment vehicle?