Interest Only Mortgages advice needed

bery_451

Hi,
Beginner questions:

- Lets say I get a interest only mortgage for 30 years. As we all know Bank of England interest rates are in its lowest in history nearing 0% which is great for borrowers taking out on mortgages and on other debts which makes money cheap. Also we know interest rates cant be at near 0% forever so in the future they will eventually go up when the economy is doing good or there is inflation. The Federal Reserve in the US said they will keep rates low till 2023 I believe. Don't know about the UK though

- The question is it possible to get a fixed rate interest only mortgage for 30 years or is that a dream? 

- Has there been a pledge from the Bank of England to keep rates low like the Federal Reserve as mentioned above for a certain amount of time?

- What's the longest length of term a borrower can get a fixed rate interest only mortgage for? Lets say this fixed term ends does this mean the rate on the mortgage becomes variable meaning for example I got a interest only mortgage on a house with a market price of £100k with no down payment, I got the rate fixed at 2% for 2 years meaning interest mortgage monthly payment is around £166 for first 2 years, not bad, better & cheaper than rent . Then the 2 year fixed term is finished, automatically moved onto variable by my mortgage provider and by then lets say the Bank of England raised rates to 9% to combat runaway inflation  , so my monthly interest only mortgage payment now becomes £750 on a £100k house that dropped down to lets say market value £50k. We all know house prices crashes when rates go higher because mortgages are not cheap no more (good for savers, not good for borrowers MSE has taught us). This means I'm in negative equity now and my monthly mortgage payments has more than quadrupled in price?

- From this the best thing I can do when the fixed rate term ends is shop around on comparethermarket.com for a cheaper rate but realistically I wont see low 2% rates again because bank of england 9% base rate so Im still screwed with high monthly mortgage payments?

- Finally I be ended up hoping for bank of england to lower interest rates asap like it did in the 'low rate era' or I become financially rekt, get evicted and be thrown on the streets homeless  ? 

Thrugelmir

US mortgage market is very different. Higher rates. Though possible to lock in for 30 year terms @ 3%-4%. 

enthusiasticsaver

Not many lenders are keen on interest only mortgages these days. As Thrugelmir says you can get long fixed term deals but they won't be at the lowest rates. 

[Deleted User]

100k interest only mortgage with no down-payment doesn't exist.
If you want interest only then you will need to put at least 25k down on this example. Do you have this? If not then its a non starter.

If you do then what is your repayment vehicle?  What is backing up thr interest only mortgage so thr lender knows they will eventually get their money without having to make you homeless.  If you dont have one then its a non starter

Fixed rates exist for 2,3,5,7,10 years after this you take another fixed rate mortgage by shopping around

bery_451

Thrugelmir said:

US mortgage market is very different. Higher rates. Though possible to lock in for 30 year terms @ 3%-4%. 

Okay so you saying you can get 30 year fixed term interest only however the rate will be higher at 3-4% instead of the usual offered 1-2% these days? 

Are these mortgages available on Comparethemarket, moneysupermarket or whatever comparison site or do I have to go through a specialist mortgage broker to get this long term fixed deal?

bery_451

enthusiasticsaver said:

Not many lenders are keen on interest only mortgages these days. As Thrugelmir says you can get long fixed term deals but they won't be at the lowest rates. 

Why you think lenders are not keen on interest only mortgages?

[Deleted User]

bery_451 said:

enthusiasticsaver said:

Not many lenders are keen on interest only mortgages these days. As Thrugelmir says you can get long fixed term deals but they won't be at the lowest rates. 

Why you think lenders are not keen on interest only mortgages?

Because lots of lenders dont offer them and from the ones that do quite a lot have mini income requirements of well north of £50k, sometimes needing over £100k annual income to get an interest only mortgage 

grumiofoundation

bery_451 said:

enthusiasticsaver said:

Not many lenders are keen on interest only mortgages these days. As Thrugelmir says you can get long fixed term deals but they won't be at the lowest rates. 

Why you think lenders are not keen on interest only mortgages?

Because they don’t want the “evil bank takes poor pensioners house” news stories that will occur when people don’t stick to their original repayment plan?

bery_451

Deleted_User said:

100k interest only mortgage with no down-payment doesn't exist.
If you want interest only then you will need to put at least 25k down on this example. Do you have this? If not then its a non starter.

If you do then what is your repayment vehicle?  What is backing up thr interest only mortgage so thr lender knows they will eventually get their money without having to make you homeless.  If you dont have one then its a non starter

Fixed rates exist for 2,3,5,7,10 years after this you take another fixed rate mortgage by shopping around

You saying most interest only mortgages require at least a 25% cash deposit down otherwise the borrower is not entitled?
So its 10 years the max you can get fixed rate, but this rate will be lower than the 30 year rate mentioned above?

Interest only mortgages are cheaper in monthly payments compared to normal mortgages so in terms of salary or work you don't need that much high income to qualify/eligible for it correct?

K_S

bery_451 said:

Deleted_User said:

100k interest only mortgage with no down-payment doesn't exist.
If you want interest only then you will need to put at least 25k down on this example. Do you have this? If not then its a non starter.

If you do then what is your repayment vehicle?  What is backing up thr interest only mortgage so thr lender knows they will eventually get their money without having to make you homeless.  If you dont have one then its a non starter

Fixed rates exist for 2,3,5,7,10 years after this you take another fixed rate mortgage by shopping around

Interest only mortgages are cheaper in monthly payments compared to normal mortgages so in terms of salary or work you don't need that much high income to qualify/eligible for it correct?

@bery_451 In practice, most lenders will require you to meet affordability for a capital repayment mortgage to qualify for an IO product. I hope that makes sense.

bery_451

Deleted_User said:

bery_451 said:

enthusiasticsaver said:

Not many lenders are keen on interest only mortgages these days. As Thrugelmir says you can get long fixed term deals but they won't be at the lowest rates. 

Why you think lenders are not keen on interest only mortgages?

Because lots of lenders dont offer them and from the ones that do quite a lot have mini income requirements of well north of £50k, sometimes needing over £100k annual income to get an interest only mortgage 

Okay your saying interest only mortgages are for wealthy middle class borrowers only?

But the 2 words 'Wealthy Borrower' is confusing, because why does a wealthy person needs to borrow when he or she is already wealthy with cash capital in their savings  ?

I thought interest only mortgages are marketed to the lower class as it offers lower monthly repayments that is 'affordable'.
So why you say they been only offered to wealthy middle class?