Can you use interest from savings to get a mortgage?

moneywow1

Hi everyone

I have (or will have) about 350k in savings (150k in ISA, the rest in normal savings, including the proceeds from selling the current house), and I'm looking for a house around 400-500k.

My plan is to use as little of a deposit as possible, say 50-100k and keep the rest in savings and use the interest to pay off the mortgage

Mortgage rates are around 3.6-3.8% and my savings accounts are all between 4-4.85% right now

My problem is I'm single and my salary by itself wouldn't be enough to get a mortgage this big, but with interest from savings it would be no problem. I'm pretty smart with my finances, and I could also mostly pay off the mortgage at any point if needed so to me it's pretty risk free, but how would a bank look at it? Is it something they'd consider? 

Also, I know I could pay a bigger deposit and have a lower mortgage, but I'd rather have the higher monthly payment and more liquidity. I also don't want to touch my ISA savings at all for now, so this way I can buy the new property and then deal with selling the current house, rather than having to sell and find a place to live temporarily etc

Thanks

Ayr_Rage

In a word, NO.

ACG

As above. 

But in more detail... 

There are exceptions to the rule. With interest rates going down however, your income from the interest is going to go down. 

You might be able to look at offset mortgage although the rates are higher and there are not too many around at the moment. 

£100k mortgage and £100k savings = £0 interest being paid. The upside here is that I assume your savings outside of the ISA are taxed? There could be savings to be made there. 

But it is quite complex and needs some discussion with a broker.

Generally speaking, what you want to do can not be achieved. If your savings were invested and making more meaningful returns, there might be something but then the size of mortgage you are after probably would not be of interest to those sorts of lenders. In the main I think you are going to struggle. 

born_again

One of the main reasons why they will not. Is you can spend your savings. Leaving no means to pay...

silvercar

born_again said:

One of the main reasons why they will not. Is you can spend your savings. Leaving no means to pay...

We have an interest only offset mortgage, where it’s clearly possible to do that. In fact the lender writes to us (too) often reminding us that the mortgage is interest only and it has to be repaid at the end of the term (Duh!) we’ve now reached the point where the offset savings account is the same value as the outstanding mortgage, but we could empty the offset savings account and leave ourselves with a massive outstanding interest only mortgage with only months to run.

moneywow1

silvercar said:

born_again said:

One of the main reasons why they will not. Is you can spend your savings. Leaving no means to pay...

We have an interest only offset mortgage, where it’s clearly possible to do that. In fact the lender writes to us (too) often reminding us that the mortgage is interest only and it has to be repaid at the end of the term (Duh!) we’ve now reached the point where the offset savings account is the same value as the outstanding mortgage, but we could empty the offset savings account and leave ourselves with a massive outstanding interest only mortgage with only months to run.

Thanks, this sounds interesting.

Are the rates good/comparable to doing what I'd like to do (low deposit, higher mortgage rate but using interest from savings to contribute)?

poseidon1

moneywow1 said:

silvercar said:

born_again said:

One of the main reasons why they will not. Is you can spend your savings. Leaving no means to pay...

We have an interest only offset mortgage, where it’s clearly possible to do that. In fact the lender writes to us (too) often reminding us that the mortgage is interest only and it has to be repaid at the end of the term (Duh!) we’ve now reached the point where the offset savings account is the same value as the outstanding mortgage, but we could empty the offset savings account and leave ourselves with a massive outstanding interest only mortgage with only months to run.

Thanks, this sounds interesting.

Are the rates good/comparable to doing what I'd like to do (low deposit, higher mortgage rate but using interest from savings to contribute)?

Your question is a circular one in that your barrier to any form of substantial borowings remains your level of employment income.

Most lenders that offer interest only mortgages ( such as offset) require income of £75k and above from employment or pensions. Investment income and bank interest is not accepted as already advised.

@Silvercar's example does not assist you unless you are £75k earner.

In the meantime, as one of the major offset mortgage providers in the market you could try Barclay's calculator to see what you could borrow ( as a maximum), and how that level of mortgage plays out with their offset product.

However, as you will see below their tracker offset mortgages max out at 75% LTV and comes with a hefty arrangement fee.

https://www.barclays.co.uk/mortgages/remortgage/rates/