mathew Posted June 4, 2007 Share Posted June 4, 2007 had a brief chat with a work colleague about these earlier. never even considered one but seems quite a few people have got them. im doing a bit of research into these but advise from sites cant compete with actual experiences so has anyone on here got one or maybe has got some info on them? Quote Link to comment Share on other sites More sharing options...
Pabs Posted June 4, 2007 Share Posted June 4, 2007 briefly looked into them - quickly decided against them. Prices on houses are expensive, but a lot of mortgage companies don't offer an interest only, and those that do are much more expensive anyway. Quote Link to comment Share on other sites More sharing options...
Havard Posted June 4, 2007 Share Posted June 4, 2007 I don't see the point tbh!! Ok your payments are low, but you then waste all your income and pay nothing off your main asset that is your house...... After 10 - 20 years you will have paid the bank a shit load of money and you are still left with the original debt. Ok you may make money on the house when you sell it but I feel that prices will go backwards and you will therefore owe more than the house is worth....... For me the only way is to shortern the term of a standard mortgage. I paid mine off in 7 - 8 years by stretching myself as far as I could. .It now doesn't matter about interest rates and all that shit as the house is mine!! H. Quote Link to comment Share on other sites More sharing options...
Todd Posted June 4, 2007 Share Posted June 4, 2007 I don't see the point tbh!! Ok your payments are low, but you then waste all your income and pay nothing off your main asset that is your house...... After 10 - 20 years you will have paid the bank a shit load of money and you are still left with the original debt. Ok you may make money on the house when you sell it but I feel that prices will go backwards and you will therefore owe more than the house is worth....... For me the only way is to shortern the term of a standard mortgage. I paid mine off in 7 - 8 years by stretching myself as far as I could. .It now doesn't matter about interest rates and all that shit as the house is mine!! H. Missus is an IFA and just asked her and whilst she used a lot more words, Harvard put it so much better In short, NO! Quote Link to comment Share on other sites More sharing options...
mathew Posted June 4, 2007 Author Share Posted June 4, 2007 hmmm interesting. completely different views to what i had been given earlier. there would be no way in hell i would manage to pay off a mortgage in 8 years havard so that theory is out of the question! so has anyone here ACTUALLY got one or had one? first hand views is what in looking for. Quote Link to comment Share on other sites More sharing options...
juanchan Posted June 4, 2007 Share Posted June 4, 2007 Interest only could be a way for people to get onto the property ladder. Within a few years, salary increase should mean that a switch to a capital repayment mortgage will be possible. I'm currently looking at mortgages and there is no way I can get a place of my own with a capital repayment mortgage at the moment. An interest only one I could afford for a couple of years though. Quote Link to comment Share on other sites More sharing options...
DannyW Posted June 4, 2007 Share Posted June 4, 2007 I'm on a homestart mortgage currently which is interest only for the first 3 years. It's the only way we could afford the mortgage on the house we wanted at the time. Luckily for us my other half's career progression means we should easily be able to handle the increase in payments when we reach the end of the 3 years. Otherwise we would not have done it. Quote Link to comment Share on other sites More sharing options...
mathew Posted June 4, 2007 Author Share Posted June 4, 2007 Interest only could be a way for people to get onto the property ladder. Within a few years, salary increase should mean that a switch to a capital repayment mortgage will be possible. I'm currently looking at mortgages and there is no way I can get a place of my own with a capital repayment mortgage at the moment. An interest only one I could afford for a couple of years though. thats excactly what i was thinking. interest only works out cheaper than renting yet you still have the possibility of actually owning the property at the end of it. like has been said capital repayments would cripple me and this way i get on the property market. Quote Link to comment Share on other sites More sharing options...
Guest NINJYA Posted June 4, 2007 Share Posted June 4, 2007 doesnt sound like a good idea - i worked out that i would have to pay about £1500 a month for a two bedroomed house in my area - just cant do it - im renting till november and really want to move - i like it here but i dont have a garden - i just wish the house prices would drop Quote Link to comment Share on other sites More sharing options...
Pabs Posted June 4, 2007 Share Posted June 4, 2007 Don't forget that quite a few lenders will not give you more than about 80% of the property value on an interest only mortgage - means you'll need a huge deposit in order to be able to get it in the first place.... Quote Link to comment Share on other sites More sharing options...
Havard Posted June 4, 2007 Share Posted June 4, 2007 hmmm interesting. completely different views to what i had been given earlier. there would be no way in hell i would manage to pay off a mortgage in 8 years havard so that theory is out of the question! so has anyone here ACTUALLY got one or had one? first hand views is what in looking for. Sorry Mat. I didn't start off with that plan and we have had a bit of luck along the way tbh. I started with a 15 year and then shortened it to 11 and then 7 and then 3 as me and the missus earned more. It has taught me to look at how much money you give other people when you don't have to. If you have a mortgage for 25 years you do not want to know how much you give the bank in interest charges only....... Also, the initial loan amounts are much higher these days, so being able to do what I did is becoming more difficult. doesnt sound like a good idea - i worked out that i would have to pay about £1500 a month for a two bedroomed house in my area - just cant do it - im renting till november and really want to move - i like it here but i dont have a garden - i just wish the house prices would drop They will, but not by a lot ie 10 - 15% max!! H. Quote Link to comment Share on other sites More sharing options...
mathew Posted June 4, 2007 Author Share Posted June 4, 2007 doesnt sound like a good idea - i worked out that i would have to pay about £1500 a month for a two bedroomed house in my area - just cant do it - im renting till november and really want to move - i like it here but i dont have a garden - i just wish the house prices would drop £1500 a month interest only?!?! Quote Link to comment Share on other sites More sharing options...
Havard Posted June 4, 2007 Share Posted June 4, 2007 £1500 a month interest only?!?! Yeah, it's a £4 Million pound house......... H. Quote Link to comment Share on other sites More sharing options...
juanchan Posted June 4, 2007 Share Posted June 4, 2007 thats excactly what i was thinking. interest only works out cheaper than renting yet you still have the possibility of actually owning the property at the end of it. like has been said capital repayments would cripple me and this way i get on the property market. That's what I've been discovering the last couple of weeks. It would get me on the ladder, and potentially would be cheaper than what my mate is paying in rent for a one bed flat in a similar area. I would swap to a repayment mortgage at the earliest opportunity though as I don't want to wait 25 years for the lender to then say "by the way, you owe us £100k". Don't forget that quite a few lenders will not give you more than about 80% of the property value on an interest only mortgage - means you'll need a huge deposit in order to be able to get it in the first place.... I've not encountered any issues with lenders offering mortgages based upon my salary, deposit and value of house I'm after. That said, I'm looking at less than 80% mortgage Quote Link to comment Share on other sites More sharing options...
Pabs Posted June 4, 2007 Share Posted June 4, 2007 I've not encountered any issues with lenders offering mortgages based upon my salary, deposit and value of house I'm after. That said, I'm looking at less than 80% mortgage Ah, fair enough then - I just know that when i was looking at an LTV of 90%, a lot of the lenders wouldn't touch me until i had a bigger deposit. Quote Link to comment Share on other sites More sharing options...
juanchan Posted June 4, 2007 Share Posted June 4, 2007 Ah, fair enough then - I just know that when i was looking at an LTV of 90%, a lot of the lenders wouldn't touch me until i had a bigger deposit. Interesting to know that. I was told that most lenders won't go over 95% as a general rule, whatever the circumstances. I didn't realise they were more cautious over interest only than repayment customers. It makes sense though, I guess. Quote Link to comment Share on other sites More sharing options...
Guest NINJYA Posted June 4, 2007 Share Posted June 4, 2007 £1500 a month interest only?!?! No - i just mean a normal mortgage - sorry wasnt too clear! Quote Link to comment Share on other sites More sharing options...
Guest NINJYA Posted June 4, 2007 Share Posted June 4, 2007 Yeah, it's a £4 Million pound house......... H. that would be nice !! Quote Link to comment Share on other sites More sharing options...
Rico2006 Posted June 4, 2007 Share Posted June 4, 2007 It all depends on your long term goals. Me, i would rather live in a large house with a few acres of land with my interest only mortgage: when I come to sell it in 25 years, im hoping it will be worth a lot more than i paid for it, and the mortgage will be paid off with the profit. Thats the optimists view. Or you could live in a smaller hous, go repayment, clear your mortgage, and buy a bigger house if you so wish. I wouldnt knock an interest only mortgage though: my brother in law has made at least 500k profit on houses by going interest only on circa 5 house sales over 6 years. You certaintly dont need to be paying over the odds for an interest only mortgage though, and you can get at least 90% LTV with the right guys. It really all depends what you want out of life. Quote Link to comment Share on other sites More sharing options...
Pabs Posted June 4, 2007 Share Posted June 4, 2007 yep - i totally agree with you. But for me an interest only mortgage for most of my life is too big a gamble to take - chances are when I come to sell that the properties have fallen in value or we hit another recession, and i end up losing money. Alternatively the money i'd spend in interest only payments mean that the sale value of the property wouldnt cover the extra over a capital repayment mortgage for the same duration. But, one thing that pushes me to actually own a property - The g/f owns the flat we live in now - and has for just under 4 years. She has made over 30k profit in the property. If we had rented it instead, we'd be in a much worse off situation. Quote Link to comment Share on other sites More sharing options...
tbourner Posted June 5, 2007 Share Posted June 5, 2007 We just got away with not having interest only, but now we've got a 120% mortgage!!!! If you can't afford the house I can't see interest only being a problem though, it's massively unlikely that your house will be worth less in 30 years time, and I mean so unlikely that it would require a catastrophic situation to cause it - in which case a measly £100-£200k would be the least of your worries!!! Quote Link to comment Share on other sites More sharing options...
JohnA Posted June 5, 2007 Share Posted June 5, 2007 I've only ever had interest-only mortgages. If you sell within a few years, you'd be surprised to find that your 'repayment' mortgage hasn't actually repaid jack. It's only during the last years of the mortgage that your monthly outlay goes towards repaying the capital. Have a look at the sliding-scale of the interest/capital element through the years. Also don't forget that 100grand now is *not* the same as 100grand 25 years from now! If you know your way around investments then it may be far better to arrange the capital repayment yourself. If you don't have a clue, then (as the others have said) a repayment will be a safer option. For buy-to-let interest-only mortgages have some tax advantages. (not that buy-to-let is a particularly smart move these days) Quote Link to comment Share on other sites More sharing options...
DaveK Posted June 5, 2007 Share Posted June 5, 2007 If you sell within a few years, you'd be surprised to find that your 'repayment' mortgage hasn't actually repaid jack. It's only during the last years of the mortgage that your monthly outlay goes towards repaying the capital. True. I had my mortgage on my current house for almost exactly 7 years. I think I borrowed £107K, and I was paying roughly £7,500 per year in mortgage payments. When I cleared the mortgage this month, I had to pay them £92K. Which means that in 7 years I paid off about £15K in capital but £37,500 in interest. Funnily enough - that's why I decided I'd like to get rid of the mortgage. Quote Link to comment Share on other sites More sharing options...
Pabs Posted June 5, 2007 Share Posted June 5, 2007 I've only ever had interest-only mortgages. If you sell within a few years, you'd be surprised to find that your 'repayment' mortgage hasn't actually repaid jack. It's only during the last years of the mortgage that your monthly outlay goes towards repaying the capital. Have a look at the sliding-scale of the interest/capital element through the years. That IS a very good point, and an interesting way to look at the situation... never thought of it like that before. Quote Link to comment Share on other sites More sharing options...
mathew Posted June 5, 2007 Author Share Posted June 5, 2007 when taking out an interest only mortgage do the banks advise or even ask for you to take out some sorta saving scheme to cover the final cost of the mortgage? Quote Link to comment Share on other sites More sharing options...
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