Interest only mortgages

Pobby

Just been reading Martins book``The Money Diet`` where he talks about IO mortgages.I wonder what type of payment vehicle,if any,people were contributing to as a way to pay off the capital.

Dan_Collins_2

Pobby wrote: »

Just been reading Martins book``The Money Diet`` where he talks about IO mortgages.I wonder what type of payment vehicle,if any,people were contributing to as a way to pay off the capital.

Well pobby I have not read it, however I would say you would be mentle to take out an I/O mortgage with the intention to repay the mortgage via an investment. There is only one way to guarentee to repay the loan at the end of the term and thats repayment!

However I would say when used correctly intertest only mortgages can be useful. For example if you are self employed and are paid irratically only have to pay the minimum, but when you are paid you can make overpayments to catch up with a traditional repayment mortgage. Also they are handy for investment property.

toonfish

there are so many ways, I'm just paying off ad-hoc lumps from other property sales and bits of surplus cash when I get them.

ISA is probably the most used by our clients, but some (dangerously IMO) are relying on inheritence money, or planning to "sort something out later".

Dan_Collins_2

toonfish wrote: »

there are so many ways, I'm just paying off ad-hoc lumps from other property sales and bits of surplus cash when I get them.

ISA is probably the most used by our clients, but some (dangerously IMO) are relying on inheritence money, or planning to "sort something out later".

toonfish are you finding the last plans becoming more and more popular?

toonfish

Dan_Collins wrote: »

toonfish are you finding the last plans becoming more and more popular?

definitely - people want to get on the ladder and would rather mortgage interest only than pay rent. I always make sure we detailed the required repayment premiums in the report, even if we haven't arranged a plan.

Virtually all the buy-to-let we do is interest only as well.

MortgagesInc

With the way some affordability calculators work it's sometimes their only option to go on Interest Only

cm233lh

I've seen IO proposed as a way of managing an offset mortgage. You get your mortgage as IO, then you plan how much to pay into offset savings each month in order to repay it. As the saving pot gets bigger, the interest payments diminish and you get more disposable to set aside in the savings pot. Keeps you in control of more of your cash for longer. Only works if you can trust yourself!
(I personally went for the same system, only with repayment right up to my retirement age.)

Dan_Collins_2

cm233lh wrote: »

I've seen IO proposed as a way of managing an offset mortgage. You get your mortgage as IO, then you plan how much to pay into offset savings each month in order to repay it. As the saving pot gets bigger, the interest payments diminish and you get more disposable to set aside in the savings pot. Keeps you in control of more of your cash for longer. Only works if you can trust yourself!
(I personally went for the same system, only with repayment right up to my retirement age.)

This is good for the self employed and ppl who can control finances, no good for a novice mind!

We have report repayment mortgage payments in r4r letters etc and even print and provide a KFI. Its all very good but its the clients choice, I never advise an IO mortgage without a good reason. B2L are a given in most cases my end also!