Interest Only Mortgage

dosh1

Hi there,

I currently have an interest only mortgage and putting money away so that I can pay it off at the end of the term.

I believe it is now very difficult to get a interest only mortgage as banks do not want to give them to people and prefer repayment.

I am considering moving and I may need more money in buying the property I want.

Are banks likely to not give me a new interest only mortgage but take the opportunity of getting me onto a repayment instead. How difficult will it be for me to get an interest only bearing in mind I am putting money away so I will have to pay at the end of the term.

Cariad71

Hi, I have just taken out an interest only mortgage. What the bank will want is evidence of your 'repayment vehicle'. In other words, how will you pay it off eventually (pension fund, property etc).

Thrugelmir

dosh1 wrote: »

bearing in mind I am putting money away so I will have to pay at the end of the term.

What's the vehicle you are using to save?

SouthLondonUser

Some banks, e.g. Santander and Barclays if I remember correctly, do 'part and part' mortgages, i.e. a combination of interest only for up to 50% LTV, and repayment mortgage for the rest. So, let's say you have a mortgage of £70k against a property worth £100k; they could give you £50k interest only and £20k repayment. The difference is that, with this product, the sale of your property can be more easily accepted as a means to repay the mortgage, whereas with standard interst-only mortgages it no longer is. These products are a bit niche and mostly offered via brokers.

kingstreet

Affordability is always based on a repayment mortgage at a stress rate of as much as 7%, so don't think because you think you can afford the interest-only payments at 1.49% you are a shoe-in for the amount you want to borrow.

dosh1

Hi,

I am currently putting money away monthly on my interest only mortgage so that I have the money at the end to repay and there is no issue with this. I prefer this option to repayment as at times it is handy to have money available if necessary.

My question was more about whether a bank will continue with an interest only mortgage or are they likely to try to persuade me to move to repayment. I want to remain on interest only because it works for me and so by getting a new mortgage of interest only is my preference and not a repayment.

I don't have an issue in saving monthly so that at the end of the term I have the money to repay.

kingstreet

We have nowhere near enough information about you and lender criteria on interest-only varies widely, so it's practically impossible to say what is possible on here.

Levels of equity, minimum income are just two of the issues lenders look at when considering interest-only lending.

Spangled

First Direct offset mortgages are effectively interest-only mortgages. But they have strict lending and salary criteria.