HSBC Interest Only Mortgage

4500_Donavan

Hi,

Just wondered if anyone had any experience of HSBC Interest Only mortgages. After initial acceptance, do they make future checks to see if repayment vehicle is ticking over OK?

Ideally, I'd repay via pension, but I know they don't accept this repayment method at application point. So, I'd initially be paying into a cash ISA to cover it to provide some evidence in first year.

Thanks for any insight. 

Mark_d

For me I demonstrated that the value of my portfolio comfortably exceeded the amount of the mortgage.  The bank don't  check this after the mortgage started

kingstreet

Have you checked HSBC criteria? From what I can see a Cash ISA is only acceptable if it currently contains the sum required to repay the mortgage - "Existing (not future accrual) cash savings."

https://intermediaries.hsbc.co.uk/pdfs/Interest-only_repayment_plans.pdf

MWT

kingstreet said:

Have you checked HSBC criteria? From what I can see a Cash ISA is only acceptable if it currently contains the sum required to repay the mortgage - "Existing (not future accrual) cash savings."

https://intermediaries.hsbc.co.uk/pdfs/Interest-only_repayment_plans.pdf

Presumably the Cash ISA could be used as the OP proposes but only under the 'Ad Hoc' approach which is capped at 50% LTV?

Not suggesting this is a sensible approach though as the OP is clearly indicating they have no intention of continuing to fund the ISA.

amnblog

If the OP is considering finding a way to get the interest only basis without having a committed repayment plan, trouble is being set up for further down the line. 

MWT

amnblog said:

If the OP is considering finding a way to get the interest only basis without having a committed repayment plan, trouble is being set up for further down the line. 

100% agree, depending on future pension fund contributions and performance as well as the availability of current tax policy at some point in the future is 'hope' not a plan.

4500_Donavan

Thanks for all your feedback. Proposed loan is £100k. Current balance of pension is £360k. I'm hoping this will be enough but read somewhere previously that HSBC don't allow SIPP pensions as repayment method for interest only mortgages. I am 54 and will continue to save into my pension for another 8 years at least.

4500_Donavan

Also, my LTV would be 36% max.

MWT

4500_Donavan said:

Also, my LTV would be 36% max.

So the 'Ad Hoc' route could work if your income is high enough to make the funding plan believable, but the SIPP does seem to be off the table from their point of view.

Still feel it is wrong to go down a path where you are intending to deceive the lender from the outset though, and depending on the 25% tax-free pension withdrawal as a repayment strategy may not even be an option in 8 years time, and even if it is, it may not be a wise move to reduce your fund to that extent...

Do let us know how it all works out. 

poseidon1

Sipps not being acceptable for mortgage funding purposes, maybe a much wider embargoe beyond HSBC.

Certainly in seeking a remortgage from Barclays ( I am already retired) they disallowed all sources of income which either were not guranteed ( Sipp, Isa, investment portfolio, bank deposit interest) or they did not understand ( commercial property rent).

Indeed it was not until the state pension commenced that they were then prepared to lend on that income source alone.

retiredbanker1

When I got mine (a long time ago and now repaid) the lender did accept Pension and savings for clearing the loan.
After I got the loan it was only in the last five years did they start sending me letters asking me if my repayment plans were on track. From memory I had to fill in one form confirming this and that was it.

Obviously eligibility criteria have changed a lot.