Interest only mortgages still available...

shortchanged_2

Alan_Cross wrote: »

I find this all very frustrating and, given the huge mass of people who took out IO mortgages, find it hard to believe we are alone in this problem.

No you aren't the only ones with this problem, it is known to be quite widespread and your example is one of what is wrong with IO mortgages.

At the end of the day you took a loan out over an agreed period of time at which point at the end of the term the balance is due in full. I'm sure almost everyone who took out an IO mortgage had good intentions of paying it off, however life has a habit of throwing a few spanners in the works and I'm afraid you took a gamble with an IO mortgage like the thousands of others who did.

shortchanged_2

marsman802 wrote: »

We just completed last week on an interest only deal on a Buy to let.

There is more equity in the house now than the balance on the mortgage we are only paying interest on and therefore received literally no questions whatsoever that were different from any previous mortgage we've applied for - just supplied them with the tenancy agreement and that was that.

Possibly the easiest mortgage process I've ever gone through

Not the same at all. BTL's are unregulated and are not party to the same criteria as residential mortgages.

However I assume you haven't fraudulently obtained a BTL IO mortgage on your residential property?

Thrugelmir

Alan_Cross wrote: »

I find this all very frustrating and, given the huge mass of people who took out IO mortgages, find it hard to believe we are alone in this problem.

Appears only to be a problem for you. Which isn't a problem at all in fact. As you have an investment vehicle that you don't want to liquidate. That issue has nothing to do with your lender. To them you have a contractual agreement to repay the money.

kingstreet

We have a recent interest-only client.

He has no intention of selling the property he's using as his "repayment vehicle" but it had enough equity to be acceptable to a lender for what he wants to do.

We fitted his situation with the best lender we could.

That's what a mortgage broker does.

Our £250 fee is being paid by the developer as they are buying on one of our sites.

I'm wondering if the OP can't find a solution, or can't find a solution on his terms, eg direct from one particular lender and is venting, rather than wanting a solution?

Let_Us_See

Alan_Cross wrote: »

I find this all very frustrating and, given the huge mass of people who took out IO mortgages, find it hard to believe we are alone in this problem.

Which lender is going to provide an IO mortgage on the basis "that you could have the funds." How many of your friends would lend you money based on you maybe able to repay? IO borrowing is still possible, the problem is undoubtedly enhanced by your age, perhaps if you actually stated your "problem" in detail you might receive more positive assistance.

Alan_Cross

Let_Us_See wrote: »

Which lender is going to provide an IO mortgage on the basis "that you could have the funds." How many of your friends would lend you money based on you maybe able to repay? IO borrowing is still possible, the problem is undoubtedly enhanced by your age, perhaps if you actually stated your "problem" in detail you might receive more positive assistance.

Maybe I didn't make myself clear.

We could have the funds on the due date by selling up a money making asset.

Two years later we shall have the necessary funds in cash, thanks to said asset.

Oh and by the way... as I recall, in the first place, the mortgage was never sold to us on any kind of 'absolute guarantee of proof' of the existence of a repayment vehicle. No such proofs were ever asked for or provided.

Like I say, we could meet the requirement, and that quite easily, by taking option one. It is merely a strong preference on our part to continue paying a mortgage past the time when our current lender wants matters to stop.

marsman802

shortchanged wrote: »

Not the same at all. BTL's are unregulated and are not party to the same criteria as residential mortgages.

However I assume you haven't fraudulently obtained a BTL IO mortgage on your residential property?

That's interesting though isn't it? Because there is never a guarantee that a BTL will be constantly let. We're fortunate that our place has been let to the same people for 7yrs now even though the tenancy is on a 2-month notice period.

I'm just surprised that it was as easy as it was - the word unregulated just seems quite cavalier in 2014.

Also I am absolutely shocked at the insinuation I would be so fraudulent haha. Quite understand why you ask it having read some of the odd stuff on here!

CKhalvashi

marsman802 wrote: »

That's interesting though isn't it? Because there is never a guarantee that a BTL will be constantly let. We're fortunate that our place has been let to the same people for 7yrs now even though the tenancy is on a 2-month notice period.

That is, however, why my bank specifies a minimum income of £100k, or savings/investments of £50k and annual income of around the same, which isn't the case for residential mortgages.

Also I am absolutely shocked at the insinuation I would be so fraudulent haha. Quite understand why you ask it having read some of the odd stuff on here!

We have seen people try to do it on here, and I'm sure that banks have had it done to them in the past, to get around whatever rules.

Mortgage_Mark_2

Alan_Cross wrote: »

Maybe I didn't make myself clear.

We could have the funds on the due date by selling up a money making asset.

Two years later we shall have the necessary funds in cash, thanks to said asset.

Oh and by the way... as I recall, in the first place, the mortgage was never sold to us on any kind of 'absolute guarantee of proof' of the existence of a repayment vehicle. No such proofs were ever asked for or provided.

Like I say, we could meet the requirement, and that quite easily, by taking option one. It is merely a strong preference on our part to continue paying a mortgage past the time when our current lender wants matters to stop.

The requirements around repayment vehicles have tightened over the last couple of years. When I first become a mortgage consultant in 2006, colleagues of mine used to 'make up' repayment vehicles, providing some bogus account number for an ISA or some sort, which was never checked - or even asked for in some cases.

Now, in order to get a lender to agree to an Interest Only mortgage (which are just as widely available, there are just more stringent checks) whatever provision you have in the background needs some certainty that it will provide the necessary funds. A pension for example, needs to be 4x the mortgage balance on day one, since the mortgage would theoretically be cleared from 25% tax-free cash, rather than the income. Same goes for savings provisions, they have to essentially be sufficient to clear the mortgage on day one (in which case, why would you need a mortgage, I hear you ask - that's exactly the way lenders want you to look at it).

In all honest, it's probably one for an experienced broker as they will know which lenders are more flexible around repayment vehicles. The general rule however is that the vast majority of residential mortgages now are repayment.

Interest only is a regulatory nightmare for banks, and they'd much rather not do it, but there are rare occasions when, BTL aside, they can do.

kingstreet

Also worth bearing in mind, affordability for the mortgage is based on the equivalent repayment mortgage over the same term.