Repayment or interest only plus over payment question

Thrugelmir

RenovationMan wrote: »

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.

Do you believe that lenders aren't going to have reviews throughout the mortgage?

RenovationMan

Thrugelmir wrote: »

Do you believe that lenders aren't going to have reviews throughout the mortgage?

No I don't. I think that the administerial overhead of reviewing repayment vehicles that are unlikely to also be invested with the mortgage lender is too large. Hence why lenders are falling over themselves to drop IO mortgages.

My mortgage has no repayment vehicle, the lender (Santander) never asked for one and so I didn't set one up. Strangely, the four horsemen of the Apocolypse have not descended. I quietly pay my mortgage interest each month and make regular (large) overpayments from investments that have matured.

Funny that.

Thrugelmir

RenovationMan wrote: »

No I don't. I think that the administerial overhead of reviewing repayment vehicles that are unlikely to also be invested with the mortgage lender is too large. Hence why lenders are falling over themselves to drop IO mortgages.

My mortgage has no repayment vehicle, the lender (Santander) never asked for one and so I didn't set one up. Strangely, the four horsemen of the Apocolypse have not descended. I quietly pay my mortgage interest each month and make regular (large) overpayments from investments that have matured.

Funny that.

Nothing says the same for ever. I know of one major lender where reviews will be undertaken.

Lavendyr

Why don't you look at an offset mortgage (e.g. First Direct) - that way you can make interest-only mandatory payments each month but also overpay - and if you need the money for refurbishment you can simply pull it out of the mortgage at any point?

dbs

The rules on interest only mortgages will get tighter IMO or else they will end, instead of reviews which is a cost to the lender I think they will insist on a 50% LTV eventually.

dbs

Lavendyr wrote: »

Why don't you look at an offset mortgage (e.g. First Direct) - that way you can make interest-only mandatory payments each month but also overpay - and if you need the money for refurbishment you can simply pull it out of the mortgage at any point?

Not sure how off set mortgages work entirely, it might be an option but if its difficult to understand then I tend to try and stay away from them.

Thrugelmir

dbs wrote: »

The rules on interest only mortgages will get tighter IMO or else they will end, instead of reviews which is a cost to the lender I think they will insist on a 50% LTV eventually.

Lenders currently have around one million interest only mortgages on their books. So worth the cost of reviewing in due course.

dbs

Thrugelmir wrote: »

Lenders currently have around one million interest only mortgages on their books. So worth the cost of reviewing in due course.

Sorry that`s what I meant the cost of reviewing existing interest mortgages must be a burden to the lenders but must be done so I think the rules will be tightened to 50% LTV only for new mortgages.

Thrugelmir

dbs wrote: »

Sorry that`s what I meant the cost of reviewing existing interest mortgages must be a burden to the lenders but must be done so I think the rules will be tightened to 50% LTV only for new mortgages.

With the amount of money at stake in terms of outstanding debt. Its in the interests of the main stream lenders to find ways of enticing people to switch. LloydsHbos now charges a loading of .2% on all new interest only mortgages. So not inconceivable that part of the review process will be a penalty interest loading if no repayment vehicle is found to be in place. Reflecting the higher risk to the lender. The old stick and carrot approach.

dbs

vectistim wrote: »

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.

Forgive my ignorance but why is a IO mortgage more likely to be considered for my current property?