Mortgage rate mystery - does 'interest only' actually exist for older borrowers?

Alan_Cross

I keep reading that such and such a lender is 'offering a 2 year fix' at such and such a rate.

Great. But on what basis?

I have usually taken this in the past to mean an interest only situation, but with many people like myself looking to remortgage in their 50s and 60s, plus tightened lending rules, I doubt very much that many people end up paying as little per month as the 'headline rate' suggests.

Can anyone tell me the actual position for practical purposes?

Crashandburn

The headline rate is there whether you pay capital and interest or interest only. The repayment route you chose is simply another variable.

Interest only is still there for clients with credible repayment vehicles in place to make sure the debt is repaid by retirement. Some also offer it on the basis you downsize at the end of the term as long as you have plenty of equity in the property.

Lenders don't want to lend interest only to people in the 50s and 60s if they have no real way of paying it back as they don't want to be kicking someone in their 70s out of their home!

Alan_Cross

Crashandburn wrote: »

The headline rate is there whether you pay capital and interest or interest only. The repayment route you chose is simply another variable.

Interest only is still there for clients with credible repayment vehicles in place to make sure the debt is repaid by retirement. Some also offer it on the basis you downsize at the end of the term as long as you have plenty of equity in the property.

Lenders don't want to lend interest only to people in the 50s and 60s if they have no real way of paying it back as they don't want to be kicking someone in their 70s out of their home!

My highlights - could you name one or two such lenders, please? I wasn't aware of that possibility.

Crashandburn

Santander, Woolwich & Clydesdale but each have their quirks on the policy. Best to get some advice on this

holly_hobby

The rate quoted, is the chargeable rate on the capital borrowed - and has nothing to do with the repayment method. In fact, if anything it will cost you more on an interest only mge over the same term, as unlike a repayment mortgage, the capital balance remains constant on and IO arrangement.

Lenders whom permit sale of the mortgaged property (which inc a smaller b society), along with other criteria, generally want the LTV to be below 50%.

Other than that, its investment vehicles, pension TFC (significant pot reqd), sale of a mge free investment property, that is in the acceptable route, for those lender still accepting IO business, and as we have already seen, this pot is slowly dwindling with some recent and significant lenders withdrawing completely from the IO new business market.

Further to which, given that the max residential mge redemption age is 75 yrs (with all but 1 lender I am aware of), and even lower at 65yrs for IO with HSBC - this in reality doesn't solve the older individuals problem (ie a home until death), as it only delays the sale to 75 - at which point its sell up and move on time.

Hope this helps

Holly