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Interest only mortgage

(12 Posts)
jofeb04 Sun 05-Aug-07 18:37:01

Have any of you had an interest only mortgage?


Our mortgage is based on two wages, and I am earning nothing like what the mortgage was on.

Every month is a strugle, and we are thinking of interest only for a few years until I go back to fulltime work?

What do you think? And on average how much does it save?

WideWebWitch Sun 05-Aug-07 18:40:50

It saves loads but you need to make sure you can catch up in later years or you are putting money into an alternative payment vehicle. BBC calculator here

allgonebellyup Sun 05-Aug-07 18:42:14

mine is interest only, and will be for a good few years until i have a proper job!
its not ideal but it was the only way to buy our first house!

think you should do it though if you are struggling!
if we were doing capital repayments we would be forking out £1200 a month!

scienceteacher Sun 05-Aug-07 18:45:03

We had an interest only mortgage when we first bought our house, but I think most lenders want to make sure that you have the ability to pay off the capital too. In our case, we had an endowment (we are old), and nowadays there are alternative schemes.

jofeb04 Sun 05-Aug-07 18:49:02

Thanks for that. Can't believe the amount we would save!!

Any major problems that we need to consider?

sarkin Mon 06-Aug-07 10:03:33

Only draw back is you will be renting from the bank. You will not be saving money you will be delaying paying back the capital. This is a good short term solution 6 months a year, after that you will need to look at your finances. Everytime they raise the base rate your monthly payment will go up taking you further away from your original monthly payment, unless you are on a fixed rate in which case you will get a massive hit when the deal finishes. But at the end of the day if you cant afford where you live then interest only it will have to be.

amidaiwish Mon 06-Aug-07 10:27:33

we are on interest only
the way i see it is the house is rising massively in value and we can always sell it, repay the loan and still have enough to buy another house outright.

i have only ever had interest only mortgages. bought my first flat in 1996. i do intend to start an investment fund to pay it off but only when nursery fees of £1300/month are over!

lovelymoo Mon 06-Aug-07 11:12:25

We have an interest only mortgage but we can pay off lump sums and pay more each month than teh interest only payment. We pay what we can afford its less than a repayment mortgage but more then the interest only payment. The interest is also calculated daily so any overpayments effect the interest straight away. Its a flexi mortgage workes great with our lifestyle at the moment as i am a SAHM.
Hope that makes sense

cat64 Mon 06-Aug-07 11:27:19

Message withdrawn

MadamePlatypus Mon 06-Aug-07 18:13:06

I don't think you are actually 'saving' money as its a bit like only paying off the minimum amount on a credit card - it will cost you more in the end.

It is high risk. When you have a repayment mortgage, the 'interest' amount goes down each month (albeit very slowly if it is a 20 year mortgage), because your outstanding debt goes down each month. Also, with a repayment mortgage, you are taking steps to protect yourself against negative equity whereas with an interest only mortgage you could be left high and dry.

moneysavingexpert.com has some good threads on subjects like interest only mortgages.

MadamePlatypus Mon 06-Aug-07 18:17:44

Also, a while ago I was in Starbucks trying to pay, when I realised that a lady was telling DS off for posting straws into the rubbish bin. I am pleased to learn that he was mearly acting age appropriately and was not the straw wasting delinquent that she accused him of being.

MadamePlatypus Mon 06-Aug-07 18:18:27

OK, so that last post was supposed to go on the thread about heuristic play...

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