no not at all but why not ?
on an interest only mortgage
- Thread starter wedrum
- Start date
no not at all but why not ?
Soldato
Just buy lottery tickets, you'll be ok
Associate
This, don't forget to do Wednesdays and the Euromillions too
Caporegime
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sell the house and move into a caravan on a gypsy camp site. that way you don't need to worry about paying the mortgage or rent/council tax ever again and you will fit right in with our neighbours. also forget paying the debts back. you don't need to pay them as they will never send bailiffs into a gypsy camp.
failing the above the lottery does seem a good shout. instead of paying anything back just stick your full wage on lucky dips.
failing the above the lottery does seem a good shout. instead of paying anything back just stick your full wage on lucky dips.
Soldato
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ok so first things first contact all our debts and get some ppi claims in
then pay off all debts and remortgage.
yeah...
the magic PPI.
Hopefully you had it on everything.
Best bet is in 10 years to clear off all debt and get the LTV down. House prices rising a but over the next 10 years should help.
Then get a new mortgage at the end (or sooner if you clear debt earlier) for repayment or sell up.
I am amazed that your mortgage is £115k and house still only £125k. Assuming orginal mortgage was 100% LTV and you had a 25 year term, its only gone up £10k in 15 years?
At least you've probably been paying very low interest rates in the last 10 years if you have a tracker. May even continue to do so for another few years which will help you save up and pay off debt.
Then get a new mortgage at the end (or sooner if you clear debt earlier) for repayment or sell up.
I am amazed that your mortgage is £115k and house still only £125k. Assuming orginal mortgage was 100% LTV and you had a 25 year term, its only gone up £10k in 15 years?
At least you've probably been paying very low interest rates in the last 10 years if you have a tracker. May even continue to do so for another few years which will help you save up and pay off debt.
Caporegime
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i think that is right. i'm pretty sure my house sold for the exact same price i paid in 2016 in 2007. so in 9 years it's went up £0. However the original owner paid half that amount in 1999. So it doubled over 8 years then has remained steady.
Soldato
Sort out your personal finances over the next eight years and then look to remortgage in the remaining 2 years of the interest only term. Pay off as much of the existing mortgage as you can afford and hopefully the price of the house will also increase in that time and you'll be in a position to remortgage at a good rate on a capital repayment mortgage.
Your age may affect the above as some lenders will only lend up to a certain age.
Your age may affect the above as some lenders will only lend up to a certain age.
Soldato
Wow a little too much negativity going on in here.
Whilst I agree the OP seems a bit negligent here, not everyone gets finance.
As the multitude of people who say things like "I wont pay into a personal pension someone may steal all the money" demonstrates
Back in 2000 I was looking for a mortgage and an "advisor" asked me about my potential inheritance as in his words "I was going to suggest you went interest only so you can borrow more, and lots of people your age are doing it, you only have to worry about the interest and pay off the mortgage when you get the inheritance, your the inheritance generation!"
He was wasting his time from that point onwards, and he was shocked I would be considering a 15 year fixed
Anyways back to OP. Pay off the short term high interest debt first. This is a must, not only does it get rid of that which is costing you most, but it also improves your situation.
Once you have that under control then look to remortgage to a repayment so you know you will be clear at term.
Whilst I agree the OP seems a bit negligent here, not everyone gets finance.
As the multitude of people who say things like "I wont pay into a personal pension someone may steal all the money" demonstrates
Back in 2000 I was looking for a mortgage and an "advisor" asked me about my potential inheritance as in his words "I was going to suggest you went interest only so you can borrow more, and lots of people your age are doing it, you only have to worry about the interest and pay off the mortgage when you get the inheritance, your the inheritance generation!"
He was wasting his time from that point onwards, and he was shocked I would be considering a 15 year fixed
Anyways back to OP. Pay off the short term high interest debt first. This is a must, not only does it get rid of that which is costing you most, but it also improves your situation.
Once you have that under control then look to remortgage to a repayment so you know you will be clear at term.
Soldato
I'm sure these will be the next PPI scandal and everyone will get them paid off for free.
Caporegime
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LMAO no chance
they knew what they were doing it's in the name "interest only" mortgage. there is no chance they get them paid off for free.
PPI is money they paid back plus interest. this is something completely different.
Soldato
Oh dear Oh dear Oh dear - someone cocked up a bit - never leave debt's to the last minute - 10 years is just around the corner for you. Good luck.
That was my initial reaction too, I assumed they must have only had a 20 year term i.e. bought at the peak of the market in 2007. House prices have roughly doubled in average over the past 15 years so it seems unlikely to have gone up less than 10% during that period unless something unusual has happened like property damage etc. Only other explanation I can think of is could have have been a 125% mortgage, but I'd be surprised if they were offered on an interest-only basis.
Permabanned
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I'm new to mortgages... I've literally just bought. Can anyone explain why a person like the OP would have chosen an interest only mortgage.
I thought these kind of mortgages were used as a way to pay only the interest (therefor cheaper monthly payments) with the idea of selling the house at the end of the term (which would have usually increased in value). The other option would be to buy in cash at the end of it. After all the interest paid is this usally a much cheaper option? Just paying interest would free up cash for you to save more surely?
I thought these kind of mortgages were used as a way to pay only the interest (therefor cheaper monthly payments) with the idea of selling the house at the end of the term (which would have usually increased in value). The other option would be to buy in cash at the end of it. After all the interest paid is this usally a much cheaper option? Just paying interest would free up cash for you to save more surely?
Caporegime
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yes people who went interest only should have invested the money that should have went into paying off the loan elsewhere so that in 20 years time they have enough cash to buy the property outright when the deal ends.
i don't see the point of after 20 years of paying just the interest you then sell the home. you then have the issue of you need somewhere to live so you have to buy and now your going to be looking at living somewhere considerably smaller or in a much worse area or likely both.
people who took them out where generally not very clued up. they aren't given out very often now. in fact only a few lenders even give you the option. nowadays they are for people with lots of money probably looking to rent the property out and flip it when it's increased in value. not as their main home.
people for some reason don't see mortgages as loans. it is a loan just an extremely large one usually with lower than average interest. however because of the size of the loan and the length of the term the interest is usually huge. it's likely OP is paying £300-£400 in interest every month and this figure will never decrease unless he overpays. essentially he has been throwing away £400 a month for the past 10 years to gain £10K. a horrible prospect. he's lost what £38K so far and counting.
my plan is to overpay as much as possible during the early years. this makes my monthly payment smaller. it also decreases the amount in interest i pay overall.
it then means later on in life i will be far more comfortable than i am now. whereas OP has done the exact opposite. he's not overpaid a penny or saved any cash to pay off the loan. as he gets older his life is going to become extremely difficult. maybe even to the point he's in financial ruin with nowhere to live.
Soldato
An endowment mortgage was exactly the same, just that you were supposed to have an investment running in parallel to give you the cash to pay off the mortgage at the end, technically an endowment mortgage was an interest only mortgage, you paid interest on the full loan right up until the last day when you paid it off.
In theory its not a terrible thing, you can usually invest at a higher return than you can borrow for, but doing that on your main home when you don't have anything else to fall back on is why they should only ever have been offered to people who understood. Plus reps earned commission on them so they loved them, hence they pushed them over repayment mortgages for years.
In theory its not a terrible thing, you can usually invest at a higher return than you can borrow for, but doing that on your main home when you don't have anything else to fall back on is why they should only ever have been offered to people who understood. Plus reps earned commission on them so they loved them, hence they pushed them over repayment mortgages for years.
Caporegime
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if you have a mortgage and want to learn more about how they all work money saving expert website has a great booklet as well as calculators you can use online.
i regularly use their overpayment calculator to plan things for the future. i overpayed the max i could without fees this year. my monthly mortgage payment has decreased by around £80 a month. next year i'm going to try and get that as close to £200 as i can. so i will then from then on have a spare £200 in my pocket rather than the banks. i will then use this to finance loans for cars, holidays, home improvements and what not.
i believe they are a lot harder to get these days. you also need large deposits iirc. so chances are the people who are now getting them are well clued up. they are great for investment properties where you don't even plan on paying them off but selling them for a large profit at the end as their value has sky rocketed whilst you rented them out to cover the interest and running costs.
i regularly use their overpayment calculator to plan things for the future. i overpayed the max i could without fees this year. my monthly mortgage payment has decreased by around £80 a month. next year i'm going to try and get that as close to £200 as i can. so i will then from then on have a spare £200 in my pocket rather than the banks. i will then use this to finance loans for cars, holidays, home improvements and what not.
i believe they are a lot harder to get these days. you also need large deposits iirc. so chances are the people who are now getting them are well clued up. they are great for investment properties where you don't even plan on paying them off but selling them for a large profit at the end as their value has sky rocketed whilst you rented them out to cover the interest and running costs.
I don’t think I’ve seen it mentioned anywhere as to how old you are or how long your planning on continuing to work for.
If your looking to retire in 10years, then hard times ahead for you I’m afraid, but if you’ve got another 20-30 years in front then as mentioned obviously you need to re-mortgage.
Given that the sweet spot is 80% LTV and you currently have 15k in equity, then surely all you need is to beg, borrow or steal 10k to get a decent mortgage rate on a 125k repayment.
Having short term debt should only really affects your affordability rating on whether banks will lend to you, if you get hold of a decent independent mortgage guy he should be able to run the numbers and let you know if you’ll qualify for a mortgage without having to pay of your current debts first.
In response to people asking why anyone would consider getting an interest only mortgage.
I brought my flat 12 years ago for 150k with a 95% interest only mortgage and no form of repayment vehicle, mainly as is was an incredibly cheap way for me to get on the property ladder. I’d never intended to stay there for 12 years but life and all that.
Now with a new born I need a house and recently sold the flat for 270k. I’ve always had variable rate interest only mortgages and the most it ever cost me a month was 950quid, with the least being 320quid and I guess averaging out at 450quid, which is half what a rental would have cost and substantially less than a repayment. In a nutshell I’ve basically earnt 500quid for every month I’ve lived at the flat.
The equity from the flat is being used as the 20% deposit on a new house, which in itself is only a stop gap move for 3 years or so, if I could I’d go interest only on this property I would
If your looking to retire in 10years, then hard times ahead for you I’m afraid, but if you’ve got another 20-30 years in front then as mentioned obviously you need to re-mortgage.
Given that the sweet spot is 80% LTV and you currently have 15k in equity, then surely all you need is to beg, borrow or steal 10k to get a decent mortgage rate on a 125k repayment.
Having short term debt should only really affects your affordability rating on whether banks will lend to you, if you get hold of a decent independent mortgage guy he should be able to run the numbers and let you know if you’ll qualify for a mortgage without having to pay of your current debts first.
In response to people asking why anyone would consider getting an interest only mortgage.
I brought my flat 12 years ago for 150k with a 95% interest only mortgage and no form of repayment vehicle, mainly as is was an incredibly cheap way for me to get on the property ladder. I’d never intended to stay there for 12 years but life and all that.
Now with a new born I need a house and recently sold the flat for 270k. I’ve always had variable rate interest only mortgages and the most it ever cost me a month was 950quid, with the least being 320quid and I guess averaging out at 450quid, which is half what a rental would have cost and substantially less than a repayment. In a nutshell I’ve basically earnt 500quid for every month I’ve lived at the flat.
The equity from the flat is being used as the 20% deposit on a new house, which in itself is only a stop gap move for 3 years or so, if I could I’d go interest only on this property I would
Interest only mortgages are great when you have a savings account linked to them (offset type mortgage), so the more you save the less interest you pay on the borrowing. It's a great incentive to save and pay your mortgage off early as you can see the interest payments drop each month. Also, if you have a large unexpected expense you can dip in to the saving account at ease but you must be stringent and make sure you make it up later. I'd only suggest this type of account if you like to manage your account and have the discipline not to spend your savings, especially when you see thousands ££ available to spend today on a whim.
I'm not sure if this type of account is right for the OP going by past comments of "being a bit silly" and getting in to debt even with the extra money from not paying the full mortgage amount, but it's easy to do so I'm not criticising here. You've had the good times, now it's time to pay the piper.
So OP, seeing as you've effectively got 120 months to find 115k which is just shy of £960 a month plus the interest on the borrowing, say £300, that's £1,260 approx you need to find each month to clear it in time. If that gives you the cold sweats then the time is NOW to do something about it. Get a new repayment mortgage with a 25 year term again and learn from the mistakes of the past.
Speak to someone qualified to give advice.
I'm not sure if this type of account is right for the OP going by past comments of "being a bit silly" and getting in to debt even with the extra money from not paying the full mortgage amount, but it's easy to do so I'm not criticising here. You've had the good times, now it's time to pay the piper.
So OP, seeing as you've effectively got 120 months to find 115k which is just shy of £960 a month plus the interest on the borrowing, say £300, that's £1,260 approx you need to find each month to clear it in time. If that gives you the cold sweats then the time is NOW to do something about it. Get a new repayment mortgage with a 25 year term again and learn from the mistakes of the past.
Speak to someone qualified to give advice.