Interest Only Mortgage - Repayment Vehicles?

NoNoDrama

What kind of things do they ask for as evidence you can repay at the end of your term?

Thanks.

Trentenders

Who is your mortgage with? I'll take a look on their website for you if you like and then let you know(?).

amnblog

The kind of things that very few people can provide.

Sufficient equity to downsize is acceptable to some lenders and the most frequently used repayment method.

NoNoDrama

amnblog wrote: »

The kind of things that very few people can provide.

Sufficient equity to downsize is acceptable to some lenders and the most frequently used repayment method.

Thanks. Does this basically mean your property would be the repayment vehicle?

Thrugelmir

Stocks and Shares ISA, Endowment Policy, Maturing Pension Scheme.

Do you have a repayment vehicle?

dunstonh

NoNoDrama wrote: »

Thanks. Does this basically mean your property would be the repayment vehicle?

That isnt a repayment vehicle. That is an outcome if you dont have a repayment vehicle.

amnblog

The equity in your property is the repayment vehicle. This is on the basis that you can evidence you can afford to downsize at a later date.

brit1234

Cash savings or inheritance as well, I'm not sure about pension lump sums.

amnblog wrote: »

The equity in your property is the repayment vehicle. This is on the basis that you can evidence you can afford to downsize at a later date.

Remember the value of your property can go down as well as up.

NoNoDrama

amnblog wrote: »

The equity in your property is the repayment vehicle. This is on the basis that you can evidence you can afford to downsize at a later date.

But isn't evidence you can afford to downsize the repayment vehicle in that case ? And what evidence would that be?

Example:
100k Property
200k Loan (over 25 years with interest)
Pay interest only over 25 years.
End of term, sell the property.
Keep any surplus to downsize/die in an old peoples home.
Mortgage company banks on prices not going down over a 25 year period and me being a 'payer'.

Apart from the obvious (good credit etc, no CCJ, defaults etc) what else would be required?

Brock_and_Roll

The answer to your question is the same as the advice you received when you first posed this scenario back in March.


In a nutshell "interest-only" mortgages are no longer available except in certain special cases such as very low LTV.


There was a crazy period when lenders were doing this kind of thing...and look at the mess it got the likes of Northern Rock in! With an interest-only mortgage for say 100%, borrowers have no "skin in the game" so it only takes a knock in property prices or a rise in unemployment etc and suddenly the bank is in the doo doo big time.




* Note mortgages interest rates are at an all-time low....pretty close to being "interest free" anyway!!! So it could be argued that you make as large capital repayments as possible to eat in to the balance whilst rates are so low. Rises in rates are possibly not that far off now - the pressure is building and will increase after the US election when the Fed will raise US rates (which will in turn put pressure on the BofE)

Silvertabby

I'm amazed that any mortgage lender is still offering IO loans!

It may seem that downsizing would be the way to go when the loan falls due, but it probably won't be that simple. You'll either want to stay in the property that you know and love, or you won't be able to find anything nice to downsize to that you will be able to afford.