Interest Only Option?

jetsetwilly_2

Currently got my house up for sale. Seen a place I want to buy.

So, I am stuck as mine has yet to sell.

I have to move in August so will be paying mortgage on my house and then rent for another property as we are moving to a different part of the country.

Someone suggested this as an option, can anyone tell me if it would work...

Remortgage my current place (Value of house approx. £160k, £87k still owed on mortgage.
Remortgage on interest only to cover the value of mine and the new place £220k. The equity in my house is enough for me to qualify for the total amount.

For 2 years, pay the interest only mortgage £800 a month approx.

In 2 years, the house should have sold, so I pay off a big chunk and remortgage back to a repayment mortgage.

Works out cheaper than renting for 2 years.

Would it be do-able?

JimmyTheWig

Problem 1. Generally banks don't like interest only mortgages these days. You certainly won't get one if they don't think you could afford the equivalent on a repayment basis.

Problem 2...

jetsetwilly wrote: »

Remortgage my current place (Value of house approx. £160k, £87k still owed on mortgage.
Remortgage on interest only to cover the value of mine and the new place £220k. The equity in my house is enough for me to qualify for the total amount.

I don't understand how you can raise £220k to buy a new place, on top of the £87k you owe, on a property worth £160k.

Or are you saying remortgage your current place to release equity to be the deposit to get a mortgage on the new place?
[Which would still have affordability problems, but would at least solve my problem 2.]

kingstreet

You'd have to remortgage onto a BTL product, unless you had enough income to support both mortgages. You'd get interest-only on the BTL, but probably not on residential now.

BTL typically means maximum 75%, with rental income - which must be 125% of monthly mortgage interest assuming 6%pa rate.

If your current property is worth £160k, you could borrow the lower of £120k, or what the rent would support.

If the property is on the market, you may get pointed questions about this being short-term as lenders don't want to be sources of impromptu bridging finance.

You'd then need a residential lender for the onward purchase, happy to accept the let property and mortgage in the background, otherwise, your income will be "taxed" by the amount of the mortgage cost, or the balance will be deducted from your borrowing power.

jetsetwilly_2

Ok, so far to complex and a no go. Thanks

Worth a try. Knew I shouldn't have looked at houses until mine sold!!!

JimmyTheWig

The other option would be to drop the price on yours to get a quick sale...

jetsetwilly_2

It has only been up for sale for a week but I am thinking along the same lines

Thrugelmir

jetsetwilly wrote: »

It has only been up for sale for a week but I am thinking along the same lines

That's no time in the scheme of things.

JimmyTheWig

Thrugelmir wrote: »

That's no time in the scheme of things.

If it is priced realistically then I agree with you.
But if it was priced to chance a good offer with a view to bring it down to a more realistic level in a few weeks time, in this case [need to move out in August regardless] that might not be worth doing.