Repayment Option

Jesse009

Hello all
Good afternoon. I need your advice. The fixed rate on my Residential mortgage will comento an end in 2 months. My Broker is in the process of getting me a new deal. I've chosen to go for interest only. I cannot afford to pay the £2400 per month (that will be for repayment). However my Broker has informed me that the interest only option is not possible due to the fact that  I don't have enough equity . The equity on my property is about 60k. The broker said I need to have at least 250k equity before I can be allowed to do interest only. Is this right?? With the interest rate at the moment its hard to afford repayment. Can somebody please advice me please. 
Thank you

CSI_Yorkshire

That would be a relatively common requirement for an interest-only mortgage.

Andreg

Interest-only criteria differ depending on the lender.  Most big banks appear to require a relatively high income.  If you don't trust your broker to cover the whole market maybe you should speak to a different broker? 

Mortgage forbearance rules now require lenders to offer six months temporary interest-only, so you could take a repayment mortgage (with the longest term possible) then immediately request this.

In the long term, if you cannot afford a repayment mortgage and you have no other investment plan to repay the mortgage, then the property is really not affordable, and you need to consider gaining other sources of income (e.g. a lodger) or selling the house and downsizing.

Jesse009

Andreg said:

Interest-only criteria differ depending on the lender.  Most big banks appear to require a relatively high income.  If you don't trust your broker to cover the whole market maybe you should speak to a different broker? 

Mortgage forbearance rules now require lenders to offer six months temporary interest-only, so you could take a repayment mortgage (with the longest term possible) then immediately request this.

In the long term, if you cannot afford a repayment mortgage and you have no other investment plan to repay the mortgage, then the property is really not affordable, and you need to consider gaining other sources of income (e.g. a lodger) or selling the house and downsizing.

Thank you Andreg. I will be speaking to other brokers as well. My broker did not say anything about the mortgage forbearance rule. 
Thank u

RelievedSheff

If you can't afford the repayment mortgage and you don't qualify for interest only then I'm sorry to say it but you can't afford that house.

Sell it and downsize to something that is affordable. 

Sncjw

How will you pay off the capital of the house at the end of the interest only term? 

silvercar

Sometimes part IO, part repayment is an option.

kingstreet

Jesse009 said:

Andreg said:

Interest-only criteria differ depending on the lender.  Most big banks appear to require a relatively high income.  If you don't trust your broker to cover the whole market maybe you should speak to a different broker? 

Mortgage forbearance rules now require lenders to offer six months temporary interest-only, so you could take a repayment mortgage (with the longest term possible) then immediately request this.

In the long term, if you cannot afford a repayment mortgage and you have no other investment plan to repay the mortgage, then the property is really not affordable, and you need to consider gaining other sources of income (e.g. a lodger) or selling the house and downsizing.

Thank you Andreg. I will be speaking to other brokers as well. My broker did not say anything about the mortgage forbearance rule. 
Thank u

This isn't a product your broker can advise on. It's the process for lenders to try to help existing customers avoid going into arrears.

housebuyer143

Interest only is not really widely available. If you don't have a really high income and viable repayment strategy then you won't get it. From your brokers explanation about equity it appears you don't have a repayment strategy and were wanting to use downsizing in future to repay the loan? 
If this is the case the broker is correct and you can't get it as all the lenders require a huge amount of equity. 

Unfortunately with interest only it's normally if you need it, you can't get it. 

MWT

housebuyer143 said:

Unfortunately with interest only it's normally if you need it, you can't get it. 

Perhaps not a popular opinion, but I think that is a good thing, you only have to look at the 'Mortgage Prisoners' to see the what happened when those restrictions did not exist...