Repayment or interest only plus over payment question

dbs

I am thinking of taking out a £100k mortgage on a house to secure a property a repayment mortgage works out at £720 over 15 yrs but an interest mortgage is £330 both fixed for two years.

Could I take out the interest only mortgage but make over payments so it works like a repayment because in the first two years I need to money to update the new property?

I would be allowed to pay off 10% per year on the interest only mortgage.

Thrugelmir

You'll most likely need to provide evidence of a repayment vehicle even if you find a lender that'll give you an interest only one.

dbs

I will have my present property to sell in the future to repay the loan.

Just noticed CO-OP bank are with drawing my interest only mortgage so will have to search again, also I will be putting down £70k for a £170K property,but most interest only mortgages require 50% deposit so it might not happen.

Thrugelmir

dbs wrote: »

I will have my present property to sell in the future to repay the loan.

That's not a repayment vehicle.

RenovationMan

dbs wrote: »

I am thinking of taking out a £100k mortgage on a house to secure a property a repayment mortgage works out at £720 over 15 yrs but an interest mortgage is £330 both fixed for two years.

Could I take out the interest only mortgage but make over payments so it works like a repayment because in the first two years I need to money to update the new property?

I would be allowed to pay off 10% per year on the interest only mortgage.

This is what I do with my current home (and what I have done with all my previous homes/mortgages). I bought our current home in May 2010 with an Interest Only mortgage and I have made more payments off the capital than I would have done had I had a repayment mortgage. We use the lower monthly mortgage payments to help us pay for the renovations on the property. It works really well for us.

My mortgage also allows for 10% overpayments each year. The mortgage is with Santander and I wasn't even asked about a repayment vehicle when I took out the mortgage, never mind being asked for proof. I believe that Santander are now requesting 50% LTV for their IO products, but there are other providers.

You could always set up a repayment vehicle (i.e. an ISA) and then close it down once you have obtained your mortgage, just make sure you make those overpayments.

Good Luck.

Dave_Ham

Hi,

Whilst I completely understand the opportunity here, all and I mean all of the lenders have clamped down on interest only recently.

You have no hope of a good product and int only above 75% LTV

60-75% depends on lender, circumstances and potential repayment vehicle.

Under 60% and there are options but these are lender specific...

Good luck

dbs

Thrugelmir wrote: »

That's not a repayment vehicle.

My present home is a safety net, I would use the lower payments on the interest only to do repairs in the first two years,rent out my present home £400 net after tax which would pay for the interest only mortgage of £330.

After two years I would then save up to £400 per month to pay of the loan every year £4800, after ten years sell my present home which with a bit of luck will be worth more than £100k net,also at 60 I should get a cash lump sum off my pension if I choose to retire early how much this will be I dont know, if I can still take it early at 60.

vectistim

If you're going to be letting your current property you should be considering a Let to Buy mortgage - such a mortgage is more likely to consider interest only.

dbs

RenovationMan

I understand you set up a saving process but how did you calculate your repayments so you knew you was paying off more than a repayment?


Quote;

I bought our current home in May 2010 with an Interest Only mortgage and I have made more payments off the capital than I would have done had I had a repayment mortgage.

RenovationMan

dbs wrote: »

RenovationMan

I understand you set up a saving process but how did you calculate your repayments so you knew you was paying off more than a repayment?


Quote;

I bought our current home in May 2010 with an Interest Only mortgage and I have made more payments off the capital than I would have done had I had a repayment mortgage.

You use a loan amortization calculator to see what your monthly loan repayments would be based on the loan (mortgage) balance, term and interest rate: http://www.amortization-calc.com/

Thrugelmir

dbs wrote: »

My present home is a safety net,

That's your opinion. A lender will take a contrary view. Given the current uncertainty in the economy. More than likely giving you options as to acceptable vehicles.