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Original poster

Interest only mortgages

12 replies

noddyholder · 13/04/2009 09:08

I have always been very anti these so am looking for some advice for a friend as I am not really up on them.They are living here but are canadian.His job has 6 yrs before he has achieved the qualifications he wants then they are going back to canada.They want to buy and are going interest only as they say they know they are not going to be here 25 yrs so are looking for low outgoings now.They have a big deposit more than half i think so they plan to pay back when they sell and think they will be no worse off and may have made a little.The monthly payments are about half their rent.My concern is -ve equity but they firmly believe prices are going up again(as does their broker)Does anyone really have interest only and not worry about how they will pay it all back?

OP posts:

cornsilk · 13/04/2009 09:10

We have interest only and worry.

Original poster

noddyholder · 13/04/2009 09:12

Cornsilk do you have savings to pay it or will you sell and do it that way?

OP posts:

cornsilk · 13/04/2009 09:16

No we have no savings. I'm going full time soon so we will use some of the extra income to start to pay into the mortgage hopefully. Also will try to change part of the mortgage to repayment when we next remortgage (soon.)

Original poster

noddyholder · 13/04/2009 09:34

thanks cornsilk.I am worried with house prices falling that they won't have enough to pay it back but they say they will risk it as they are more likey to make money and will treat it like savings .According to them with houses cheaper in canada they can't fail!

OP posts:

MadgeBishop · 13/04/2009 09:36

We are interest only. We do have some endowments that will hopefully go some way to paying part of it off when they mature, but otherwise we have share save schemes that we pay into.

At the moment we are in the middle of remortgaging for a better rate which will save us around £200 per month and this will be put into an account so we can pay a bit extra off each year as well as using the share save every three years. We are allowed to pay up to 10% off each year without incurring any penalties.

But yes, I do worry.

Original poster

noddyholder · 13/04/2009 09:39

I think I will suggest they pay the saving they are making on rent into an account to make lump sum overpayments although I think they plan to live it up on the difference!In a way I admire them for living now but I can tell she is a bit worried but he is not a bit!

OP posts:

violethill · 13/04/2009 09:41

It sounds a reasonable approach for their situation, given that they won't be living here forever, and they have a large deposit.

Generally though, interest-only is madness if you haven't thought how you'll pay all the capital back.

lalalonglegs · 13/04/2009 10:21

I'm with violethill - I don't think prices are going to go up in the short term but I don't think they will halve either so, since they only want to stay for a few years and it will be much cheaper than renting, why not? I think by 2015 we should have seen some price inflation so they may make something if they choose wisely.

Original poster

noddyholder · 13/04/2009 14:31

I suppose I do think they will possibly halve so am concerned for them that they will lose their nest egg.

OP posts:

LeninGrad · 13/04/2009 14:50

This reply has been deleted

Message withdrawn at poster's request.

Original poster

noddyholder · 13/04/2009 15:14

I don't think they know about all teh costs involved yet and that if they repay a mortgage early where there has been an introductiry 'offer' they will have redemption fees.Will tell them to check that with their broker

OP posts:

brettgirl2 · 13/04/2009 19:36

If house prices halve from where they are now then the effect on the economy would be so completely devastating that I doubt it would matter where the savings were kept!

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