Interest Only Mortgage

[Scarlettpixie]

Has anyone got an interest only mortgage? Was it easy to arrange?

I live in a 4 bed house with a mortgage of around £500 per month. My son is at university, living away from home/home in the holidays/some weekends.

I have a car loan of £200 per month and about £3000 on credit cards (on 0%). I give my son £200 per month for groceries while at uni (less over the summer when he will be home and I will be buying more food).

I have literally no money left at the end of the month. It's tight. I have been spending my savings to top up when I need to make a purchase and now that has reduced to the lowest level I am comfortable with. What is left, I really don't want to touch as it is for emergencies. Basically, it would be enough to pay off my credit card and car loan leaving me with zero. It is my safety net.

I planned to downsize when my son started uni but I love living here and keep putting it off. The more I think about it, the more I wish I could stay until DS has finished uni and is set up in his own home. Obviously if he comes back here to live and work for a while, he will pay board which will help with the monthly expenses until he is ready to move out.

I am wondering about taking on an interest only mortgage of around £100K which will give me enough money to do some jobs around the house (new bathroom/kitchen) and pay off the existing mortgage/debts. I have priced this up and would be around £500 a month better off.

I earn £45k per year and am single. I see many lenders won't allow an interest only mortgage unless the annual household income is significantly higher, although on paper I appear to meet the criteria with 1 lender.

My house is currently worth £450K so within the next 5-10 years, my plan would be to downsize to a house worth £300K - £350K and pay off the mortgage in full. The work I plan to do should add value, at least to the value of the work and would make the house more appealing when I do come to sell.

Has anyone done similar? Can you suggest any lenders? Any thoughts welcome.

She thinks she'll be £500 better off because she plans to pay off the car and credit card with the mortgage. But she isn't thinking about how she'll just overspending and crack open the credit card again just because it's there.

where does the rest of your monthly income go though? i dread to think how big the council tax is etc. you just want us to give you permission to remortage and keep spending rather than looking at what and why you spend so much you can't afford.

Thinking about borrowing more money before even completing a budget is really bad money sense. You are letting your fantasy overrule common sense.

Paying twice as much interest on a car loan as you are earning in savings is pointless. How old is the car as you still owe a lot.

Getting an interest mortgage means you are effectively borrowing £500 a month against your house and half of that is to fund your son, instead of him getting a job or in case he comes home which is madness. A budget will show where you overspend and can cut down.

Your son only needs to work 4 hours a week and you would be halfway there. That wouldn’t be hard for him to do. You really need to apply some sense of reality.

Your son should look for a uni job, at the bar or something. They're often very flexible

https://www.moneysavingexpert.com/banking/budget-planning/

Use this budget planner. I swear by it. Don't just guess your budget! Download ALL your transactions from banking as far back as you can go, and use the headings to enter what you are spending. Enter all the bills, and annual costs like holidays. Be honest. Then see where savings can be made and set realistic targets.

Once you've got a budget, every month, download your transactions and allocate them using the budget headings in a spreadshee.t Easy and fairly quick and it really brings home where the pointless spending is going (£25 a week on coffee and snacks in my case, that was before buying work lunches)

If you use cash, keep the receipts and enter those too. 6 months of that will really help with controlling spending.

Also are you claiming the single person council tax discount? Using loyalty cards for grocery shopping? Getting the best deals on utility bills and mobile phone? My SIM-only deal costs £4.90 per month for 5GB.

As per PP - use the savings to pay down the debt as it’s costing more than the savings are earning.
Immediately cut up credit card.
Put money that was servicing the debt into a savings account OR depending on your comfort level and available savings rates split it between mortgage overpayment and savings.
Sell anything that you do not use, including clothes.
Do NOT neglect your pension.
Track every penny for 6 months to see where your money is going.
This time next year your financial outlook will be very different - no debt, car owned outright, small mortgage and a savings pot for emergencies.
Good luck!

Whether it's a good idea or not, who knows.
However yes you potentially could. I remortgaged within last year to an interest only mortgage based on a salary less than yours through landC mortgages with principality bsoc. Was very straightforward and will tide me over until I can sell and downsize if a few years.

Really, you need to get a firm grip on your finances, see where your money is going and stop wasting money on interest if you can pay off your loans with savings. Then you can build up your savings again. But knowing where your money is going is the critical thing.

I'd recommend downsizing now (excellent for decluttering!) then again to a flat when you're in your v early 70s - unless you were planning to downsize to a flat in 10 years

Fine. No interest only.

The figures:

These are my direct debits currently:
Mortgage 492
Life and critical illness 32
Building and contents 29
Dog insurance 57
Life insurance 8
Gas and Electric 174 (already reduced since Sept)
Water 40
Council Tax 213 (after 25% discount)
Broadband 30
My Phone 30
DS Phone 10 (he can take this over)
Data 4
Memberships 10
Gym 35 (cancelled from April)
Monthly account fee 18
DVLA 17
Spotify 18
Prime 9
TV Licence 15
DS Groceries 200-250 (£50pw reducing to £25 over summer)
Tesco Delivery Saver 7
Credit Card Payments 50 (chipping away at the balance on 0%)
Car insurance 20
Loan 195

Total A 1513

I have recently cancelled few subscriptions including Now TV, Audible, Netflix and Disney+.

My other spends/expenses are:
My Groceries 300 (I overspend and need to work on this)
Fuel 50
Dog 100 (food, field, flea working, contingency for vet)
Nails and hair cuts 20 (4x per year)
Mounjaro (WLI) 230 (plan to start tapering off by summer)
Meal out 50
Other socialising 50 (sometimes less)

Big Items/Costs
Christmas/Gifts 50
Opticians/Dental 50
Car MOT/Service/Maint 50
Misc house purchases 50
Short breaks x 3 in 2026 200

Total B 1200

My salary is closer to 43K than 45K.
My take home pay is £2650 after pension deductions.
Totals A and B = £2713 (so -63)

You will see there is nothing above for house/garden maintenance or clothes/shoes but ideally I would like to set aside monthly amounts for those too.

There are a few things you can reduce- phone, prime, Spotify, gym etc. stop getting nails done. But you’re right not a huge gap.

Your life will be so much more comfortable if you downsize.

your gas and electric is probably double what it should be. move to octopus and go on tracker. get rid of paid spotify.your groceries are double what they should be. don't go on holiday until debts are clear. and stop paying a monthly account fee on your bank.

also all that insurance - put 50 a month away in an isa for the dog money. any gap go to trading 212 and invest in a stocks and shares isa. Facebook rebel finance school. do the course. broadband, phone and water. again you can cut these. shop around then change providers using topcashback or similar for extra cash. life insurance and critical illness? do you need all of this?

I am not willing to not insure my dogs. I have already made 2 claims totalling £1800 for one of them and she is still young. They've paid me more than I have paid them. The other one is older and has never had a claim. You just never know what will come up.

I shop around every year/end of contract for the best deal. Gas and electric, phones, broadband, car and house insurance. I replace my phone every 3 years so usually do 2 years contact and 1 year PAYG before switching. I cannot cut anything currently as I am tied in. I am really good about not wasting water and there is only me. I am hoping this will come down now DS isn't here (he likes loooong showers).

I took out the additional life insurance for £8 a few years ago when my life and critical cover didn't cover the whole of the mortgage. It's only £8. It was cheaper than new life and critical (because it's just life). I like knowing DS will be ok and if he wanted could keep the house in the short term.

I will look at the other things you mention. Thanks.

Gas & Electric is absolutely insane per month for 1 person. I don't pay that with 5 people in the house and 2 WFH.

Dog insurance is very high too if only 1 dog.

Groceries for you & your son are €550.a mobth. Again that's close to what a larger family would pay.

Has your life insurance been updated to reflect the low o/s balance on your mortgage?

Have you tried to price online pharmacies for the Mountjaro? lots of pharmacies (real reputable pharmacies) are offering it slightly cheaper. Check out chemist warehouse and a few others.

Check out the bank fee.. it's quite high.

Meals out / socialising / holidays / beauty
.. I would put maybe £100 away a month and thats your budget. If you get your hair & nails done this month you might not be able to eat out. This will be short term until you sort the debt out.

It's good you are contributing to pension though.

If you downsize you could also scrap the life insurance.

100% agree I should be able to cut the food budget. I have a ton of food in and over buy. I should be able to cut it to £200. I have been drawn into buying supplements/protein shakes/drinks etc by being in the MJ community and know I need to use what I have before buying more. That has now stopped. I use some online subscriptions for stuff like loo rolls, smol, wild deoderant etc which I tend to forget to accound for and should easily come within the grocery budget. I do include medications other than prescription ones which I have a prepayment plan for £11 per month and i've missed off my budget. This is probably only a tenner a month but in reality it probably falls into the overspend. I will work on this.

Sorry I have cancelled all my TV and book subs except Prime which also gives free delivery on stuff (I know) as well as TV. I have to keep Spotify. My house is usually full of music. It keeps me sane being on my own! I do pay for duo so DS can use it too but it's only a bit extra. We also talk about/share our music so it's a nice connection.

I will not book any more holidays until 2027 and only if I know they are fully budgeted for.

Thank you. Really helpful points (despite some of my resistance) :)

No that’s sensible! It’s a good idea - don’t get rid of the whole 10k. But you could use some of it to pay off some of the 6k.

Keep some. Otherwise if your washing machine breaks etc you’ll just be borrowing again! Let alone loosing your job or something.

Unless you’re body building don’t waste money on protein shakes. You can get protein in your usual diet.

paying that much for your energy is not shopping around at all. honestly i don't know who you are with and how much you use, but power and groceries are enough to feed 5. huge savings to be made there. nobody has to keep spotify - just use the free version and wait for the adverts. hardly an issue.

Thank you. In particular this: 'Groceries for you & your son are €550.a month. Again that's close to what a larger family would pay.' is a very good point and a bit shocking when you put it like that. I will work on getting it down especially as I seem to have a lot of food in.

Dog insurance is for 2 dogs, only one lives with me. The other is my ex dog but I know my ex won't insure him so we are where we are. All the other doggy expenses are for 1 dog. She is an anxious rescue hence the field and trying to feed her 'proper' food on the advice of a behavourist - although I am sure on the latter part she couldn't care less about so long as I vary it a bit. She easily gets bored and eats like a cat! She probably has too many treats.

Not sure what to say about gas and electric. I need to work on cutting it down in more in the rooms I use less (I have turned it off in a couple but could turn it down in some others). It's probably cheaper to put the gas fire on of an evening than turing all the radiators back on which is something I am trying. Similarly a heated throw while working. I am home almost all the time. I am really good at turning lights off and my computer so hopefully it will come down a bit more while DS isn't here running his PC/XBox/TV at all hours and heating all the rooms because we don't know where either of us want to be. I did try to cut costs last time I renewed the contract but the best deals suggested only a small saving and it didn't seem worth the bother.

Anyway, thank you.

hang on student spotify is a thing - why is DS not paying for that himself? and subscriptions for dishwasher stuff and deodorant. cancel them all. absolute rip off. stop paying his groceries, cut yours in half and halve your energy bill. that is a 400 a month saving there already.

btw - switch the heating off and buy an electric throw for 30 quid for the sofa and a fitted under electric throw for the bed. who are you with for energy and which tariff?

get smart meters and go here

Octopus Tracker | Daily UK Wholesale Price Tracker | Octopus Energy

sorry another post and then i am stopping - hold on, ex dog. you are paying for your ex's dog? Erm stop that immediately. Like yesterday. Literally stop. Also, is your ex the father of your DC? If so, they can contribute to uni costs etc surely?

And in the meantime please work on your financial literacy here

www.facebook.com/groups/rebelfinance

You all make good points. It's food for thought.

I did look at student Spotify but really it's similar to me paying for Spotify duo except he is paying. I am keeping mine. It does include some audio book hours with the paid version which we do use. I won't adjust his budgets this Uni year but will discuss spending with him and review his budgets at Easter to see how he is doing.

I have been on MJ for 15 months. I had hoped to get to goal in a year but it's looking more like 18 months now. I contemplated switching product but this does work for me and many who switch are struggling. I won't rule it out though. I am currently shopping around and switching suppliers every month. I am on the highest dose though now so full price is ridiculous. When I started on the lowest does it was about £100 per month and I knew it would go up but the prices went up around August/Sept time and since then the highest dose is over £300 per month at full price (which I won't be paying).