Lazy repost - Interest only, the ticking timebomb say Daily Mail

DervProf

Graham_Devon wrote: »

Also allows one to get the loan in the first place.

I might be wrong, but in theory, getting an IO mortgage should be more difficult than getting a repayment mortgage. I know the monthly payments are lower for IO, but surely a lender wouldn't calculate borrowing ability purely on monthly cost.

shortchanged_2

DervProf wrote: »

I know the monthly payments are lower for IO, but surely a lender wouldn't calculate borrowing ability purely on monthly cost.

They are not supposed to be doing it now, but it was rampant in the previous decade as being seen as a way to be able to afford a mortgage.

DervProf

Graham_Devon wrote: »

If finances allow being the key point that it's not a plan, rather a gamble.

How many others took interest only mortgages with this mindset?

TBF Graham, a repayment mortgage will only be paid off "if finances allow". Having said that, I suspect it's less risky for a lender to have a customer lose their job after 5 years on a repayment mortgage that if they are on IO (assuming no capital repayments were made).

shortchanged_2

wotsthat wrote: »

!!!!-a-Doodle-Doo. Someone else that must have missed the 'debate renoman's mortgage' threads.

IO allowed Renoman to use the money that otherwise would have gone into capital repayments to be spent on renovations instead with a plan to overpay at a later date.

As it happens it's irrelevant because, judging by his overpayments, his income has been much better than he predicted at the start of his 'adventure'.

If anyone would like to book Renoman for an after dinner speaking tour just let me know as I'll be acting has his PA and will be ghost writing his book too.

You to are obviously not answering my point in that how is Renoman £26K better off now just because he has an IO mortgage?

Would you care to give it a shot?

FTBFun

shortchanged wrote: »

I'm still waiting for FTBFun to explain how Renoman is £26K better off though.

You'll be waiting a while, because I haven't argued that's the case. It has however suited his personal circumstances better, it seems.

DervProf

shortchanged wrote: »

They are not supposed to be doing it now, but it was rampant in the previous decade as being seen as a way to be able to afford a mortgage.

I think I know someone who might be able to still provide an IO mortgage, possibly without real proof of income.

Can you guess who ?

Answers ON a postCARD.

RenovationMan

Emy1501 wrote: »

The FSA seem to think differently. they seem to believe that something like 80% of the IO mortgages over the next 10 years have no repayment strategy. I suspect they have done research to back up their theory. The fact that you may fit in to the other 20% does not mean the problem does not exist.

oops I think you completely missed the point of my post. I'm actually saying that as far as the FSA believe, I have no recognisable repayment plan. I have no plan registered with my lender, nor was I asked for one when I took out the mortgage. I'm part of the infamous 80%.

shortchanged_2

FTBFun wrote: »

You'll be waiting a while, because I haven't argued that's the case. It has however suited his personal circumstances better, it seems.

So are you agreeing that Renomans statement is somewhat disingenuous?

nearlynew

DervProf wrote: »

I might be wrong, but in theory, getting an IO mortgage should be more difficult than getting a repayment mortgage. I know the monthly payments are lower for IO, but surely a lender wouldn't calculate borrowing ability purely on monthly cost.

This is how it used to work up until about 5 years ago ...

Mortgage Applicant (MA): I've seen a house I want to buy and need a mortgage
Mortgage Broker (MB): No problem. How much is the house?
MA: £100k
MB: How much do you want to borrow?
MA: How much can I borrow?
MB: How much do you earn?
MA: 20k
MB: No problem. Right (after doing some calculations), if you choose a repayment mortgage 100k will cost £600 per month. However an IO mortgage will only cost £500 per month.
MA: I can afford that
MB: If you can afford £600 a month, what you should do is take out an IO mortgage for 120k and buy a more expensive house.
MA: Good idea. Go for it.


This is how "financially savvy" people end up in the 5h1t.

shortchanged_2

nearlynew wrote: »

This is how it used to work up until about 5 years ago ...

Mortgage Applicant (MA): I've seen a house I want to buy and need a mortgage
Mortgage Broker (MB): No problem. How much is the house?
MA: £100k
MB: How much do you want to borrow?
MA: How much can I borrow?
MB: How much do you earn?
MA: 20k
MB: No problem. Right (after doing some calculations), if you choose a repayment mortgage 100k will cost £600 per month. However an IO mortgage will only cost £500 per month.
MA: I can afford that
MB: If you can afford £600 a month, what you should do is take out an IO mortgage for 120k and buy a more expensive house.
MA: Good idea. Go for it.


This is how "financially savvy" people end up in the 5h1t.

This is spot on nearlynew and is exactly what was going on over the previous decade.