Interest-only mortgage

330d

Im looking to purchase a house and need some advice. The mortgage anount is £125k and im looking around £620 a month on a 2 year fixed, 25 year repayment mortgage.

This monthly amount is slightly high and im looking for ways to lower it. I have not got any more funds to increase the deposit so the only other option is to increase the mortgage term to 30/35 years.

The other option i have been looking is an interest only mortgage for the first couple of years and i then ill switch to a repayment. Im looking around £400 a month for an interest only.

But i have been told i need a repayment plan such as an endowment, ISA, stocks or shares as a way to repay the capital.

Is this correct? Or can i get an interest only mortgage without the above?

If so, i presume an ISA is the best and easiest way as i save a certain amount every year?

Senior_Paper_Monitor

Your age ?

How much can you afford a month if £620 is 'slightly high'



and now I've got my brains together after the day from hell:

What is loan to value (even with repayment vehicle very great majority of lenders will only consider 50% max for interest only)

Setting up a 'new repayment vehicle' will costs as much as repayment (if not more) so all sorts of alarm bells ring at this point



.... so back to the original questions ?

330d

I am 24 and the LTV is 30%. I would be happier if the payments were around £520-550 a month.

In regards to the repayment vehicle, I want to see what options I have and how they compare.

Dave_Ham

Am I missing the point here or are your sums incorrect..

You want a mortgage for £125k on a £400k+ property and are worried about steep payments of £600??

You will not get interest only generally, but if your loan to value is genuinely 30% then you will be able to.

Your plan is fraught with danger and risk and not sure it would ever look like good advice, depending obviously upon your detailed circumstances.

Can you confirm you want a mortgage of £125k on a property purchase price of £415k ish..?

harvey115

I think he maybe means his LTV is 70%

House = £178K
Mortgage = £125K

Dave_Ham

Good call - got me a bit early in the morning.

Largely the interest only option is now removed (this subject to being the case) as no mainstream lender is playing at those levels.

Any repayment vehicle you may start typically has to have been in place at least 1 year before you start the mortgage and they are very, very specific..

maninthestreet

What is your gross annual income? For a £125K mortgage, even at 3.5 times income, you will have a gross income of £35K - if that is the case, you shold easily be able to afford £620pm.

shortchanged_2

Interest only, the trap many people fell into. Have a look at the numerous posts on here where people had the same idea as you with all the good intentions and now find they can't afford to transfer to a repayment mortgage.

Don't forget, the longer you hold off from a repayment mortgage the bigger the monthly payments become because you have less time to pay off the intitial captital advance.

And anyway as others have stated IO mortgages are now as rare as hens teeth.

Thrugelmir

imr4n wrote: »

In regards to the repayment vehicle, I want to see what options I have and how they compare.

Best option is a repayment mortgage. As the others all carry a degree of risk. Given that the repayments are an issue for you. Not sure that a speculative strategy which require increased funding makes any sense.

caeler

The first 2 years of my first mortgage was interest only, then I switched to repayment. This was nearly 10 years ago when times were easier. It did help but still lost 2 years worth of repayments.

330d

I should of mentioned that a very large part of the £400k is a gifted deposit.

Anyway regardless, im going for a 35 year repayment mortgage as the payments are more affordable.