Interest Only Lifestime Morgage??

Gunstar

Hi Folks,

I was reading about some kind of mortgage that you just pay interest on and when you want to sell up the money pays off the mortgage itself.

Does anyone know what I mean, if you are they any good? Or worth at least looking into?

Thanks in advance!

dunstonh

It is called equity release. Typically an option of last resort for over 55s short on money.

Gunstar

dunstonh wrote: »

It is called equity release. Typically an option of last resort for over 55s short on money.

No it wasn't equity release, it was some kind targeted at self employed people I think? :S

Annisele

Dunstonh is right; a lifetime mortgage (as per your title) is a form of equity release.

Gunstar wrote: »

I was reading about some kind of mortgage that you just pay interest on and when you want to sell up the money pays off the mortgage itself.

That just sounds like an ordinary interest only mortgage to me - you pay the interest while you live in the house, and when you sell it the proceeds go to pay off your debt.

Interest only mortgages aren't as easy to get as they once were. Generally you'll need a lot of equity, a plan (other than downsizing) for paying off the debt, and enough income to be able to afford a repayment mortgage.

Wh05apk

Are you thinking of something like the Halifax Retirement home plan? this was an interest only mortgage without an end date, you simply paid the interest only amount?

Unfortunately this was withdrawn nearly 2 years ago, but there are a couple of equity release providers who allow interest repayments.

Caladan

As Annisele said, I think he just wants a normal interest only Mortgage.

On that assumption - Interest only Mortgages have to be repaid at the end of the term (usually up to the age of 65, or up to 40 years give or take, whichever is the shorter). The down-side is if you haven't been sensible and paid most of the Mortgage off by then, or arranged another investment to cover the repayment, you have to sell the house and you may end up having to rent, so you've just spent tens of thousands of pounds in interest and you don't even have a house at the end of it.

By all means look into Interest Only (although as mentioned before they're tough to get without a clear strategy in place) but be very aware of the risks.

Gunstar

Caladan wrote: »

As Annisele said, I think he just wants a normal interest only Mortgage.

On that assumption - Interest only Mortgages have to be repaid at the end of the term (usually up to the age of 65, or up to 40 years give or take, whichever is the shorter). The down-side is if you haven't been sensible and paid most of the Mortgage off by then, or arranged another investment to cover the repayment, you have to sell the house and you may end up having to rent, so you've just spent tens of thousands of pounds in interest and you don't even have a house at the end of it.

By all means look into Interest Only (although as mentioned before they're tough to get without a clear strategy in place) but be very aware of the risks.

Thanks for the input, basically I'm self employed and my friends (full-time employment) have been offered mortgages for 60-80k more than me and I earn double by myself than what their households earn (two people.)

It's not fair the way they do it and I was looking at other potential avenues to get the amount I need.

Yorkie1

Have you been (legally) minimising your income declaration for tax purposes?

If so, this is the natural consequence of adopting that strategy.

Caladan

Gunstar wrote: »

Thanks for the input, basically I'm self employed and my friends (full-time employment) have been offered mortgages for 60-80k more than me and I earn double by myself than what their households earn (two people.)

It's not fair the way they do it and I was looking at other potential avenues to get the amount I need.

Anytime.

As Yorkie1 said, if you have been minimising your income to reduce your tax liabilities (which your accountant will probably encourage you to do) then that's the figures lenders will use, I don't see why it's unfair, if that's what you declare you HMRC then that's what you declare, can't have it both ways.

Self employed is always considered higher risk as well, you have far less to fall back on if it all goes to pot.

The amount you can borrow on interest only doesn't tend to be much more than you can borrow on repayment anyway, assuming the lender is looking at salary multiples (think 3.5 - 5x your net, declared, income).

I'm not suggesting you've done anything wrong (assuming the tax returns/accounts are the reason your borrowing power is so much lower) but that's the consequences of it if it is how your returns have been prepared.

Kind regards,
Cal

Annisele

I wonder if you were thinking of self cert mortgages? They're basically dead now, but in the past some self employed people would use them to effectively say "I promise I can afford to pay my mortgage, but I can't prove it".

Gunstar

Annisele wrote: »

I wonder if you were thinking of self cert mortgages? They're basically dead now, but in the past some self employed people would use them to effectively say "I promise I can afford to pay my mortgage, but I can't prove it".

I think that's what I was reading about! Shame they don't do them anymore, thanks for the reply though!