Interest only mortgage question

Whiterose23

I owe £75k on my mortgage; my house is valued at around £240k. Im 57 and have 11 years left on my mortgage but due to ill health I may need to work less soon.

I would like to switch to an interest only mortgage indefinitely to keep my outgoings down so I can afford to stay in my home.
My plan would be to sell up once my kids have left home and downsize (probably in the next five years).
Is this a scenario that lenders would be happy with?
Any advice welcome, thanks.

MovingForwards

Depends what your income is, but anything less than about £70k a year you'll probably struggle to flip to IO.

Have a close look at your proposed new budget and cut out/ reduce everything possible.
https://www.lemonfool.co.uk/financecalculators/soa.php

Run a benefit check on your proposed new income and see if there's anything you'll be entitled to

https://www.entitledto.co.uk/

As your kids are now 18+ you'll have to look at charging 'keep' as it's for their benefit the mortgage is paid.

Whiterose23

Thanks for your response. My kids already contribute but at the moment are low earners so I can’t take more from them. My earnings are nowhere near that amount - sorry for my inexperience but why would I need to be earning so much to be considered? I was hoping the equity in my house would be of benefit to me. 

housebuyer143

Whiterose23 said:

I owe £75k on my mortgage; my house is valued at around £240k. Im 57 and have 11 years left on my mortgage but due to ill health I may need to work less soon.

I would like to switch to an interest only mortgage indefinitely to keep my outgoings down so I can afford to stay in my home.
My plan would be to sell up once my kids have left home and downsize (probably in the next five years).
Is this a scenario that lenders would be happy with?
Any advice welcome, thanks.

It's unlikely, there are only a few lender's who allow downsizing as a way to pay back the loan and have no income requirements but they all require minimum equity of at least £200k, which you don't have. 

Interest only is considered a high risk strategy and they therefore only offer it to people who don't need it, such as those with high wealth. They need to be sure people will be able to pay back the loan at the end which is why they no longer offer then to everyone. 

K_S

Whiterose23 said:

I owe £75k on my mortgage; my house is valued at around £240k. Im 57 and have 11 years left on my mortgage but due to ill health I may need to work less soon.

I would like to switch to an interest only mortgage indefinitely to keep my outgoings down so I can afford to stay in my home.
My plan would be to sell up once my kids have left home and downsize (probably in the next five years).
Is this a scenario that lenders would be happy with?
Any advice welcome, thanks.

@whiterose23 General comments based on the limited info in your post -

A decent spread of lenders - If your income (sustainable income including salary, pension, benefits, etc.) is sufficient to meet affordability for a 75k loan over a 13-23 years term on a capital repayment basis, there are a decent number of smaller building societies that may consider lending on an I/O basis with downsizing as the repayment vehicle.

A much smaller number of lenders - will look at affordability on an interest-only basis.

In both the above cases, the downsizing plan needs to be plausible based on the part of the country that you live in.

I would recommend speaking to a whole of market broker to get a realistic idea of your options.

If the above doesn't work out, given your age, a Retirement Interest Only mortgage might also be worth considering.

Whiterose23

K_S
Thank you for the more positive response. Just to have a bit more detail my house is a semi detached 3 bed in Somerset. I earn £35k.
Pensionwise I am forecast to have around £12k of my own money in pension when I retire, plus full state pension on top of that so not a lot but hopefully enough for a single person to live on. I also expect a small amount of inheritance of around £20k at some point although I know there’s no guarantee.
In my area a 2 bed terrace or flat would cost around £170k upwards at todays prices.
Regarding my health I may need to retire completely at some point depending on how things go.

diystarter7

OP
I'm sure you are not interested as most people living in their own house do not want to live in a flat, especially rental. But have you considered a sheltered scheme? The council i worked for  years ago about 10 years ago did allow house owners to move in as long as they were 50 or 55 years+ of age.  You can look it up on your coucil website. This will give you loads of money to enjoy and save  quite a lot for rainny day/presents for kids/etc and treat yourself and easily pay your rent etc.