Interest Only Mortgages advice needed

bery_451

grumiofoundation 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 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?

Of course banks wont lend to pensioner 65 year old pensioner unless the pensioner is some super fit and healthy freak that the pensioner can go show his gold Olympic medals to the bank reassuring the banks that he/she has another 30 years life left in the tank so banks no need to worry about the pensioner dying on the mortgage!

comeandgo

bery_451 said:3

grumiofoundation 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 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?

Of course banks wont lend to pensioner 65 year old pensioner unless the pensioner is some super fit and healthy freak that the pensioner can go show his gold Olympic medals to the bank reassuring the banks that he/she has another 30 years life left in the tank so banks no need to worry about the pensioner dying on the mortgage!

got mortgage until 75.  If you have enough income through pensions you can get mortgage.

MWT

bery_451 said:

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?

For the most part, interest only residential mortgages are not marketed at all as they have many risks attached and are a poor choice for all but a very limited set of circumstances and yes, those circumstances are most likely to make them suitable for those who have higher earnings and a clear path to be able to afford to repay the amount borrowed by the end of the term.

They are most definitely not a good choice for those of more modest means and no certain path to being able to repay the amount borrowed at the end of the term.

You are looking for the sort of products offered in the '80s and so many of those ended badly for all concerned...

[Deleted User]

An interest only mortgage because you cant afford a repayment mortgages
 isnt a type of mortgage that is allowed to be done anymore. 

K_S

bery_451 said:

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?

@bery_451 I don't do a lot of IO or part-and-part (part IO and part repayment) mortgages, perhaps one every 1 or 2 months or so on average. The "wealthy" who get them often do so because they have far more productive places to use the money than paying down a sub 1.5% mortgage. 

We don't make the rules. Generally speaking, as per the lender criteria in the market for IO resi mortgages, it is aimed at 

- people who can afford to borrow the same amount on a capital repayment basis

- high income (usually 75k single or 100k joint)

- have an existing, viable repayment vehicle such as another mortgage-free property, a large pension, etc.

- who are buying a property at the higher end of the market and so will have a high £££ equity in the property 

So to sum up, you usually can get an IO mortgage only if you can prove that you absolutely don't need one

grumiofoundation

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

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?

As above not generally correct. 

If all someone can only afford the interest (not capital) how are they going to pay off the mortgage? (Hence earlier comment about pensioner ‘losing’house when they don’t have not the ability to pay of mortgage).

Out of interest (no pun intended) are you planning on taking out an IO mortgage or is this all academic?

If the former what will be your repayment vehicle? Assuming also you are aware IO mortgages cost more in interest over the term than repayment? 

Edited as fat fingers caused to post half way though.

Cheese1990

grumiofoundation 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 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?

Also because the banks have already been stung by interest only mortgages. Typically you need to earn 70k+ and have to have a solid repayment vehicle. In terms of repayment vehicles bear in mind most lenders will treat s&s ISA's as having very conservative levels of growth so you basically need to show you can save the entire amount in cash by the end of the term.

big_saver_5

People complained that interest only mortgages were missold as they didnt realise they were interest only. As a result of people wanting compo for their own idiocy the lenders stopped selling them to people without very strict criteria as people need to be protected from themselves and the lenders need to be protected from the compo chasers 

bery_451

comeandgo said:

bery_451 said:3

grumiofoundation 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 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?

Of course banks wont lend to pensioner 65 year old pensioner unless the pensioner is some super fit and healthy freak that the pensioner can go show his gold Olympic medals to the bank reassuring the banks that he/she has another 30 years life left in the tank so banks no need to worry about the pensioner dying on the mortgage!

got mortgage until 75.  If you have enough income through pensions you can get mortgage.

Do you mean you got a mortgage at the age of 75  ? Or banks don't lend to over 75's for obvious reasons?

bery_451

MWT said:

bery_451 said:

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?

For the most part, interest only residential mortgages are not marketed at all as they have many risks attached and are a poor choice for all but a very limited set of circumstances and yes, those circumstances are most likely to make them suitable for those who have higher earnings and a clear path to be able to afford to repay the amount borrowed by the end of the term.

They are most definitely not a good choice for those of more modest means and no certain path to being able to repay the amount borrowed at the end of the term.

You are looking for the sort of products offered in the '80s and so many of those ended badly for all concerned...

The borrower don't have to pay the principal capital at the end of the interest mortgage as the borrower could sell the property instead and who knows houses prices could double by then meaning that £100k house example stated before could be worth £200k meaning borrower made £100k profit and the bank gets the other £100k to obviously pay off the principal capital. 
Of course the opposite can happen where the borrower goes in negative equity meaning the borrower is rekt and have to make up the difference if house is worth less than £100k when selling at end of mortgage.

Bank of England and their Monetary policy on interest rates on whether to raise the interest rates or lower it will determine which of the 2 scenarios the borrower will end up in. So its kinda like a gamble where we are at the hands of the Bank of England in London and their decisions.

We all can agree prices of everyday life from food shopping to paying bills is not getting cheaper, it is getting more expensive annually due to Inflation. A bag of chips like 50 years ago was like 5-10p, now its like £2-3. No one can say things are getting cheaper annually lol. On that basis isn't inflation good for long term debt such as long term 30+ years mortgages as inflation makes your debt lower & cheaper so that £100k house example mentioned earlier could feel like £10000 at that future time when the mortgage term ends through all those years of compounding inflation.

Having said that I assume commercial high street banks employ the smartest economists and researchers and analysts on the planet to research for them to predict the future of where the financial world is going so these commercial banks can decide which mortgages is most profitable for them at what times but they can all agree that loaf of bread or pint of milk or box of eggs at the supermarket is not getting cheaper annually lol   

So in conclusion isn't long term term debt good as inflation is your friend for debtors out there but a enemy for savers?