Interest only mortgages

going_nowhere_fast

Hi all. I am looking for opinions from people with experience or knowledge of interest only mortgages. I wouldn't have considered one in the past but I'm feeling desperate.

Bit of background info. 

Currently live in a terraced house. Repayment mortgage. If I'm honest I am in a house that matches my income and I am quite content in a smaller property.

The problem is all the surrounding houses are being taken over by private landlords who don't spend any money on the houses. They are getting in to a serious state.  Some 2 up 2 downs have even been turned in to flats so you have two separate households living in tiny houses, landlords won't pay for bins, council won't supply them for free so there is now a constant pile of stinking rubbish, fly tipping and even dead rats. I am now in a situation where an unmaintained house is directly causing me issues. Landlord will not fix it. Inside it's like something off BBC Panorama with damp and mould.

It's not just the impossible task of getting the houses next door repaired but the stress and mental toll. I can't take anymore of it. (Starting a separate thread for advice on the latest saga.)

I have had my house valued. The equity plus a new repayment mortgage would allow me to leave this terrace and buy another slightly better terrace. My house is worth less because of the landlord situation. But I'm scared I will end up in the same situation again as landlords are slowly buying up all the terraces. All the first time buyers are opting for shared ownership on larger / new houses. Affordability wise I'm £30k short of being able to buy a 3 bed semi. That's what I need to aim for because (unless you are unlucky) they seem to be well looked after.

Now the questions! I did Google first but am non the wiser.

Would an interest only mortgage allowance me to get a more expensive house? I would aim to swap to a repayment one as soon as I can.

Is the eligibility criteria the same as a repayment?

I'm a single parent. Work full time. Receive no maintenance (not even worth pursuing that). Child benefit, no UC. Am not a high earner but I earn enough to look after us.

Only looking to move because of landlords who don't spend money taking over the area.

Thank you.

400ixl

Interest only mortgages are much harder to get. You would need to have a way to repay it in place and endowments are even harder to find these days and not really suitable if you want to switch back to repayment.

A longer term to reduce the repayments may be a better option on a repayment mortgage.

Sure the mortgage experts will be along shortly.

going_nowhere_fast

A longer payment term doesn't allow me to borrow more. I guess I'm asking for the impossible really. Might get a lottery ticket...

Emmia

The key question really is how you'd pay off the capital at the end of the IO term? That's the question the bank will want to have answered if you applied for one of these mortgages... what's your plan for that? (You can't rely on a rising house price).

It would presumably also be at a fairly high LTV - 90%?

going_nowhere_fast

That's a sensible question. I was thinking swap to repayment mortgage after a couple of years so it would just mean overall I'm paying more interest but it sounds like it's a silly idea. I was just clutching at straws I think.

Emmia

going_nowhere_fast said:

That's a sensible question. I was thinking swap to repayment mortgage after a couple of years so it would just mean overall I'm paying more interest but it sounds like it's a silly idea. I was just clutching at straws I think.

Ok, so if you got the IO how will you magically have enough money in x years to afford the repayment mortgage - when you'll be x years older and closer to the end of the term, which will also limit how far you can extend the repayment mortgage term

Big promotion? New career?

Sadly whilst I can see why you'd want to do this, the numbers probably don't stack up.

going_nowhere_fast

Thanks mum 😊 

It's just disheartening when you can't change your situation. Maybe I just need to accept another terrace and take the risk.

dinosaur66

very unusual that landlords are buying up property in your area unless it is a single big company which it sounds like it is from the maintenence / bins issues

smaller landlords are selling not buying

i think a bank would only give you a 6 month grace period on interest only and then revert to svr which will be expensive ..

look on facebook marketplace for the large wheelie bins / i see them on there in my area/ i gave mine away on there for free / cant be too much

i have family member who took out a £52 k interest only mortgage in 1989 / 35 years later she has still not paid any capital off and she will be 67 in 12 years time , albeit property is in london 

going_nowhere_fast

Ok I've been convinced to scrap the interest only mortgage idea.

Where I live private landlords are buying every terraced house that comes on the market, literally. Every sold sign is followed by a to let one. It's destroying the area because community comes from people being invested in the area where they live and having a mix of long term residents together with the shorter ones. Has been happening slowly over several years but it's awful now. 

Terraced housing here is cheap to buy, lots of people looking for houses to rent so they're never empty, the landlords don't spend any money maintaining the houses because there is always someone desperate enough to rent it so no maintenance costs. We now have landlords buying houses and renting them directly to Serco now too. They tend to put a few men in each property so higher rent, it's guaranteed rental income for several years and (I think) Serco cover repair and maintenance costs as part of the deal so it's very popular with landlords round here.

dinosaur66

if you stick it out for a year or so the new tennants right act will be in place should be 2025 and tennants will be in much stronger position with regard all the problems your road has .

landlords will not be able to ignore any problems

does not help you with untidy pig stye tenants though as compared to owner occupied like yourself 

/ i know an area called westcliffe about a 10 mile drive from me similar to your situation that once was really nice and has been blighted by so many streets where every house been turned into split flats for rent and tenants and landlords just let it fester with same problem of rubbish / unkempt property / weeds in drains showing it has no maintenence /drugs /

i am a landlord makes no sense to me as the bill for doing maintence is way less than letting the issues go and it is your asset /but of course i watch the tv programes and know it is rife hence majority on here lump landlords altogether in same boat.

that deal with serco if similar to ones with local housing associations the landlords will be in for a money shock when there is a limit to 3 months rent maximum ammount spent to put there property back to how it was.

going_nowhere_fast

I'll have a look at the Act, I don't know anything about it. Thank you.

I don't understand the lack of maintenance either. There is nothing fundamentally wrong with the house just needs one job doing properly and that would be it for years. I said on another thread the irony is if he had fixed the external problem when I asked that would have been the end of it but because I've got to ask the council for help they will likely force him to repair all the damage inside his property too. Nobody knows / knew about the state of it inside so he could have avoided that expense.

I did not know about the three months rent limit. Serco are changing smaller properties here into HMOs (they don't require the same permissions apparently). Three months rent sounds quite low to put them back into houses.