Pick your Brains RE: Moving to Interest Only

Little_Help_Please

Evening all,

After some advice if possible, few years ago I bought a house and basically moved my parents in.

They have resided in the house and continue to do so (nice quiet area that they both know and they are both happy there).

I continued to pay the repayment mortgage, safe in the knowledge that they have a home free from worry and I have an investment property that's looked after by people I trust.

Throughout this time I have lived out of the area (live with my partner).

I'm now looking at the possibility of moving from are payment mortgage to an interest only (basically my parents are not going to live therefore ever and to be honest I could utilise the additional monies (for the repayment element of the mortgage) elsewhere) and have contacted the bank (Halifax) requesting the necessary forms.

They have now sent me the forms requesting my repayment plans to clear the mortgage at the end of the 20 years remaining.

No problem with this but just wondering am I thinking alongthe right track here....

I basically owe £84,000 on the repayment mortgage and the house is worth (conservatively £125,000) - So option one

As this is not my residence (I basically live about 250miles away) could I say that I plan on selling this when my parents decide to move (Mum's 63 and Dad's 67) - TBH this is my intention (keep in mind that there's about 20years left on the actual term of the mortgage

Or if the bank say this is not valid, I can provide evidence that my pension gives me a lump sum of £68,000 when I retire which if required I could pay off the mortgage, then set up a ISA for the £16,000 difference.

As for the Halifax, they have always been fully aware I took the mortgage out to enable my parents to live in the property, so there shouldn't be any issues there.

Finally I need to provide a letter confirming my plans for repayment - Does anyone have a template?

Thanks for your input

LHP:beer:

HappyMJ

I would just tell them the pension plan and ISA's will pay the mortgage as the primary plan even though in reality you will just sell it.

You would just write a normal letter. It just needs to pretty much say what you have said above.

kingstreet

A copy of the Halifax requirements may be useful here;-

Pension;-

For the purposes of backing an interest only mortgage, a maximum of 25% of the current fund value with the current value to be greater than £1 million. Where customers are on a final salary pension scheme the lump sum can be used if it is greater than £250,000. Pensions can be combined to reach the £250,000 and there is no need for confirmation of the full fund value.

ISA

We will compare the value of the ISA/OEIC/Investment Bond with the amount of interest only lending required, taking into account the remaining term of the mortgage and future market volatility. The valuation we will assign to the investment is 80% of the current value which must be greater than £50000

Important points on repayment plans:

Repayment plans CANNOT be accepted if they include the name of anyone NOT named on the mortgage. Your client can use more than one repayment plan to cover their total interest only amount. In this case, please send the relevant evidence for all repayment plans.

The following are NOT acceptable repayment plans:

Sale of main residence.
Sale of other commercial property.
Sale of non property assets.
Inheritance.
Bonuses.

Little_Help_Please

So that pretty much poo poo's option two then!

Sorry but who has a lump sum of £250,000+ :rotfl:

So would my only option be the selling the property at the end og the mortgage term i.e. 20 years time (or sooner)

Or is that not a viable option either?

Thanks

LHP

Dave_Ham

Halifax are not up for Interest Only lending and therefore you are incredibly unlikely to meet their criteria.

You will either have to sell up or remortgage to a regulated buy to let, this will involve some additional costs though....

All the best

Little_Help_Please

Thanks for the update Dave, so you don't think they'll go for this not being my main residence & I'd therefore fund the repayment by the sale of the property?

Thanks

LHP

Dave_Ham

It will cost you nothing to ask, just from experience they are looking for reasons not to do it...