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Original poster

does anyone have an interest only mortgage without a repayment vehicle?

36 replies

bossykate · 13/12/2005 14:35

and if so, how do you plan to repay the mortgage when the time is up? or do you plan to sell up and move on at that stage?

i'm asking because i'm about to be made redundant and i don't really want another job.

having done the figures about 50 million times, i think the only option for me not to work would be for us only to pay the interest on our mortgage...

i have one friend who does this - up to now i've thought he's mad! just wondering if anyone else does this, why and how do you expect the mortgage to resolve?

TIA

OP posts:
Tinker · 13/12/2005 14:37

at teh redundancy bk

Tinker · 13/12/2005 14:38

Don't pe ople have them if expect to inherit oodles of cash?

LUCYlastiKATEdchristmastocking · 13/12/2005 14:38

my mum has. when she retires, in 15mths time, they'll just downsize and move. if all goes to plan, then they'll be mortgage free. it is risky to do but for some people, the only way to keep their home.

Epiffany · 13/12/2005 14:39

I id when I was on my own, I was meant to have an endowment, but property was forecasted to up in value by 75% due a to a new rail link to London so I binned the endowment, knowing that I would sell with lots of equity.
This did all work out fine, although my solicitor at the sale was appalled.

MARINAtivityPlay · 13/12/2005 14:40

No advice here bk but desperately sorry to hear this. I mailed you at work - are you still there?
If this enables you to stay on in your current home and stop all the insane juggling with afterschool care ( on that front, I must say) then could it be worth a short-term punt at least?

crunchie · 13/12/2005 14:40

We do this BUT we also overpay so it is like a repayment mortgage.

It can be a good idea in the SHORT TERM. For a few years until more money is coming in TBH. For me if anything happened to my job our mortgage is very low (interst only about £300 - £350 a month) so we know DH could cover it if necessary.

I wouldn't plan on it for a long term solution

Original poster
bossykate · 13/12/2005 14:43

thanks for the replies.

i think my friend who is doing this - haven't quizzed him too much, being british about money - has a couple of options in mind, inheritance or releasing the equity and downshifting.

i wouldn't feel entirely comfortable that either of those options would leave us free and clear in 20 yrs...

OP posts:
NewBethlehemGirlwithsparkles · 13/12/2005 14:43

Sorry to hear about the redundancy BK.

We were going to swap our mortgage to the interest only one, purely to buy a slightly bigger house but in a different part of the country.

The sums were really pleasing in that we would be paying less a month in a bigger house than what we are now but....

Our mortgage advisor had said that unless we could almost guarantee some changes in our finances i.e. A promotion, graduation-going in to a well paid job, or a higher salary then it was a very risky chance to take. The payments would have gone up £500 extra a month after the interest was paid

Dh is working towards a better paid job but sadly he cannot guarantee that will happen so we didn't change the mortgage and we didn't move.

Glitterygook · 13/12/2005 14:44

We do but it's a current account mortgage so we can pay off as much as we like whenever we want - we always overpay so we are chip, chipping away at it all the time. Actually, we do have endowments but just not enough to cover the cost of the loan. The plan is to pay the mortgage off anyway, as we are doing, and the endowments will just pay us out lump sums that we can spend how we like.

In the short term, while I'm only doing bits of work (SAHM donig freelance) this is the best option - we can overpay lots more in the future.

Original poster
bossykate · 13/12/2005 14:46

marina, i'm on holiday today (dd's nativity play) and not binned yet but it's a near certainty in the NY - don't think my firm would do it just before christmas.

short term, hmmm. if i were going back to work, might as well do it straightaway, rather than be out of the job market for a couple of years...

dh's career is taking off, but in his sector it is extremely unlikely that he would match my current salary for a good many years.

OP posts:
Enideepmidwinter · 13/12/2005 14:47

sorry to hear about your redundancy bk

we have one at the moment but overpay.

walkinginawinterBundleland · 13/12/2005 14:48

sorry to hear about this BK. the mortgage stuff sounds a bit scary...

Enideepmidwinter · 13/12/2005 14:49

tbh I would never have one in a million years if we didnt know for certain that we would be able to pay off the mortgage when the time comes

Pam70 · 13/12/2005 15:09

Would you get a redundancy package and could you keep your hand in freelancing for a few years till your kids were a bit older and you didn't need to juggle childcare?

If you were able to do the freelance thing from home and just pay interest on your mortgage for these few years, you would still have the option of going back to work a few years down the line and going back to a repayment mortgage?

I had similar thoughts along these lines last year but wasn't made redundant in the end.

SilentBite · 13/12/2005 15:20

bk so sorry to hear about this

I think it sounds like a great idea myself for a few years til kids in school and you feel like working again. Could you do a shorter interest only mortgage eg 15 years, leaving you 5 years to clear the rest?

longwaytogo · 13/12/2005 15:44

we are thinking of doing the same thing. We have both lost our jobs which came with the house. The only way we stand a chance of getting back onthe property ladder is to do interest only till i can go back to work when the two littlies are in school.

It's all really scary

hotmulledwinemama · 13/12/2005 15:57

Some of our mortgage is backed by an endowment and an ISA - some of it isn't backed by anything when we remortgaged to fund house improvements. TBH the bit that is not financed is the best bit. Had a warning notice that the endowment will not pay out the whole amount when matured and as the stock market has performed so crappily the ISAs probably are worth little more than toilet paper. Luckily, we earn a lot more than when we took out the mortgage so the shortfall isn't really an issue - and we have enough savings anyway - thankfully.

At the moment, I am checking out offset mortgages as I think this is a better way of financing a mortgage and means you don't pay tax on savings etc.

So not having a repayment vehicle is not such a bad thing IMO - wouldn't touch an endowment or ISA repayment vehicle with a barge pole.

Milgestoe · 13/12/2005 16:08

Should be fine, but i would approach your lender now while you are still employed and before any redundancy notices are handed out. We have interest only, but via a current account mortgage and lob a thousand or so off the capital two or three times a year. I have some buy to lets also on interest only and will sell to repay the borrowing. It doesn't bother me in the slightest, but then I am probably a bit too relaxed about money.

northerner · 13/12/2005 16:11

We have interest only. Plan is to downscale and use inheritance.

littlemissbossy · 13/12/2005 16:16

Hi BK sorry to hear about the redundancy. Our main mortgage is a flexible repayment mortgage i.e you can pay the interest only if you want but can pay the capital off either in monthly/regular installments or in chunks with no penalties. We also have a 'couple of other' interest only mortgages for buy-to-let properties we own, which we intend to pay off once the properties are sold. Interest only mortgages are ok in the short term IMO. Your lender will still be keen to know how you intend paying the debt off in the long term, although they don't have a problem giving you this sort of lending if you've plenty of equity in the property concerned. HTH

differentstrokes · 13/12/2005 16:19

regular mnetter here namechanging as some people know me in RL and I like to keep money matters private.

Is it worth looking at changing your mortgage - whilst you are still employed would obviously be good.

Dh sorted changing ours to a flexible mortgage. I think it's possible to take a 12 month complete break from any payments with ours as well as other options like a period of underpaying.

We3kingsofOrinocoare · 13/12/2005 21:10

I'm a mortgage broker, and mine's interest only.
I'm only working 16 hours whilst the kids are small, and having interest only gives us the flexibility to use the cash (ie the difference in the payments between repayment and interest only)if we need it, or we can pay it on to the account, as others have said, as an overpayment.

My personal opinion is that interest only has its place, as long as you understand what you're getting into - ie that your balance will not reduce therefore meaning at the end of your mortgage you will still owe the full balance, and that unless you do something to reduce your balance you will have to repay the full amount which may mean selling your home. It also (slightly) increases the risk of negative equity as your balance does not go down. The other thing to remember is that if your balance is not reducing you will pay more in interest over the term (eg if you have a £100k interest only mortgage you pay interest on £100k for the full term, where as if your balance is reducing you pay interest on £100k, then £99k, £98k etc etc)

Phew! Hope I've not bored you! Basically, if it's a short term situation (ie just a few years) then go for it, but not long term.

hth

handlemecarefully · 13/12/2005 21:32

Yep - but we have quite substantial investments.

janinlondon · 14/12/2005 08:36

BK So very sorry to hear this, especially after all the nanny traumas etc. Hope you find a way around the mortgage question. If you don't want another job (I can completely empathise with this, being the primary breadwinner in our family) I'm sure you will find a way.

hoXMASchick · 14/12/2005 08:42

really sorry about the redundancy bk .

we have a typical repayment mortgage & it would scare me a lot to just repay interest with no endowment (actually i'd never even thought of it before this thread!). but if it works for you then go for it.