Interest only mortgages

Pobby

I would be interested to know how people with this type of mortgage the plans they have for the repaying of the capital.years ago often it would be an endowment but seeing the dreadful press they have recieved I guess folk are figuring a different way of tackling this.

dmg24

I used to have a Maxi ISA, at the moment I have nothing (I can't afford it), in the future I shall receive an inheritance that will pay off a big chunk of it, and then I'll think about the rest (I will probably change to repayment).

My plans may seem quite 'random', but they will work for my circumstances. Obviously I would not recommend these unless you have certain guarantees, such as the inheritance (I would rather not be receiving it!) and a much higher future income.

sarkin

Thats the problem too many people on interset only with no way of ever repaying the debt, as interset rates have been on the rise people are now paying more money just to stand still.

Pobby

sarkin wrote: »

Thats the problem too many people on interset only with no way of ever repaying the debt, as interset rates have been on the rise people are now paying more money just to stand still.

A few years ago I spoke with people who had strange ideas regarding the housing market no doubt inflamed by the media spin.Some thought that houses would continue to spirall year on year,some people thought that 3% interest rates were now the norm and would continue on into the future.The best one I heard was``the government won`t let it happen``responding to doubts regarding the sustainability of the pyramid sch---,oops,sorry the housing market.I remember Baroness Thatcher reaching out a helping hand to us when it last went belly up!

raq

we had 2 years interest only and thankfully just finished. We are now only paying an extra £80.00 per month. Don't regret interest only at the time as it suited us and we are now on repayment. It all depends on the individuals financial state of play

shaunrc

Hi Pobby

One alternative you may not have considered is putting your mortgage on a split basis. What this means is having some of it on a repayment basis and some of it on interest only. This means that at least some of it is being paid off and by not having all of it set to be paid off it is cheaper monthly.It is worth investigating with your lender.

Why do I suggest this? I am an IFA who deals with mortgages as well and I see so many people who take out interest only mortgages and have no repayment vehicle at all and I wonder how they will repay it. I am an ethical person and do mention it to customers but usually get brushed off!

Another route is to set up an ISA and save into it and use that to help repay the mortgage. This has the weakness/strength of being dependent on investment performance which we dont know in advance, but it will at least produce a sum to help.There are a lot of choices in this compared to an endowment which started off with with profits only before encompassing other fund choices so overall things have improved.The downside with more choice is that you have to make a choice!

Anyway good luck.

sarkin

I always recomend repayment followed by split 50/50 repayment and interest only. then the client asks for interest only as they cant afford repayment.