Mortgage Term

ahughes76

Hi,

I have a quick question that I'm sure can be answered quickly!

I'm looking to port my current Interest Only (IO) mortgage (25 year term) to HSBC 5 year fixed rate mortgage. I would like the mortgage to remain IO but HSBC have said that as I just hit the 75% LTV rate they can only offer me the IO mortgage over a 15 year term. If, after the 5 years are up, I look to port the mortgage to another provider will there be any issues with me increasing the term of the mortgage to say 20 years?

In short my question is - will I experience difficulties if I accept the 15 year mortgage term from HSBC and wish to port to another provider and increase the mortgage term in the future?

I hope this makes sense!

Thanks in advance,
Andrew

HappyMJ

It all depends on what the mortgage market is at the time you switch. Interest only mortgages may be banned in the future and you won't be able to get one at all. Then again they may still be OK if sufficient proof of paying the mortgage off at maturity is provided and as long as that date is on or before your expected retirement date.

ahughes76

Thanks for the quick response HappyMJ.
I'm not sure on the type of mortgage that I might want in the future (capital payment of IO) I was just a little concerned about how a lender would react to me coming along and saying "my current mortgage term is 10 years but I want to extend to 20 years with you".

kingstreet

The term won't be an issue.

As long as you have enough time to retirement, you should be able to pick a term of your choice.

The problem will be the interest-only element. There is a thematic review under way, but the FSA has not banned interest-only under the MMR, so you may be alright having an element of your mortgage on interest-only as long as you have a credible repayment vehicle. Sale of property is not viewed as such if the only property is the one subject to the mortgage.

ahughes76

Thanks kingstreet, that is what I wanted to hear!

JimmyTheWig

ahughes76 wrote: »

I was just a little concerned about how a lender would react to me coming along and saying "my current mortgage term is 10 years but I want to extend to 20 years with you".

They won't care.

So the only problem is if, for one reason or another, you can't get the mortgage you want in 5 years time, or in 10 years time, or 15 years time.
At that point you would need to pay off your mortgage.


[But saying all that, I've never heard a lender restrict the term of an interest-only mortgage due to LTV. Should the OP be confirming he understood this correctly, or have those with more experience than me come across this before?]

holly_hobby

No term is not restricted re income or LTV per se, as long as the source of income is both acceptable and sufficient during the repayment term.

However, term is restricted with respect to the lenders max redemption age (or max term ie. 30 yrs, which ever is the lesser), with most lenders (but not all) having a max redemtion age of 75 yrs old (in fact HSBC have a max age of just 65 yrs for IO arrangements). So you don't have the choice of an open ended term, regardless of income (notwithstanding lifetime equity release mges, and the couple of lenders whom don't operate restrictive max age criteria).

Lenders under FSA regs, also have to verify at least once during the lifetime of the IO mge, that there is an acceptable and sufficient repayment plan/vehicle in place.

From my reading, you are 50 yrs old (hence the max 15 yr IO term offered by HSBC), which means that if you take the 5 yr product, and then seek a remortgage in 5 yrs time (and subject to status/criteria of course), a further 20 yr term (which will take up to 75 yrs old), should be ok, albeit this will be the max term generally available at this point, due to the age restrictions as noted (with any subsequent lender/mge moves after this, having a reducing term to coincide with the pivotal redemption age as discussed above).

So you need to keep this in mind for future planning.

Hope this helps

Holly