Home buyer subsidy thing, interest only and stress

[LastButOneSplash]

Does anyone fancy chewing the cud with me on this...

I've just bought a 3 bed house on a repayment mortgage. My previous house was also on repayment. It's the way I've always done things. Buy what you can afford, pay money off, own house, simple.

However, I've recently become aware that some others buy much bigger houses that they couldn't afford repayment on, so just do interest only, sell the asset at the end and downsize. So they live in much bigger houses than I would do.

I've been snooping on right move recently and noticed that for what we paid we could now get a much bigger new house with that government scheme thing. Pay minimal interest on the extra, then just pay it off in 25 years.

I was perfectly happy, prefer the cautious approach, and don't even want to live in a new build, but this has all started stressing me (I'm generally stressed at the moment). I feel like I'm being an idiot playing the cautious game when everyone around me is enjoying their big houses. I don't even know if I know anyone who does use this approach, I've not discussed it, but feel a bit like everyone knew and I just didn't realise.

What are people's experiences? Am I being an idiot? Is my house buying approach stuck in the 70s? Or am I over egging something that is actually rare? Please be kind, I am generally feeling stressed with life.

well I'm quite cautious too as a general rule and have a repayment mortgage. I was too cautious to get on the housing ladder early and could have gained a lot of equity if I had - but I only regret it a little. Of course if you are more willing to take risks you have a chance of reward but also of things going wrong. I do know people who have had interest only mortgages but mostly as a stop gap. I don't think I would feel the same about a house that I knew I would have to sell in order to repay the capital eventually, and there would always be the possibility that the house would not be worth as much as I needed at that time to pay off the capital

Thanks camtt. That's what my partner says, about the house not feeling the same.

I don't know anyone who has an interest only mortgage and intends to pay it off by selling the house at the end of the term. It sounds like a stupid way to approach buying your home because what happens if you can't sell it? You'll then have a huge debt you can't pay off.

I don't know many people with interest only mortgages. You're talking huge sums so if something goes wrong you're stuffed. I think you're doing it the right way.

Thank you. I started to think that because of inflation it wouldn't even be a huge sum in 25 years. You know how older people tell you how the bought their house for sixpence. But I suppose that's more than 25 years.

no difference between interest only mortgage and renting really

Most lenders no longer offer a pure interest only mortgage (ie using the eventual sale of the property as a means of repaying the debt). They will expect you to have a repayment vehicle in place such as a pension plan/isa plan etc.

I wouldn't do it. They are relying on the market making enough money for them to be able to downsize..... If it doesn't they are stuffed and if it does they have lost the opportunity to downsize and have that profit supplement their retirement because they owe it to the bank.

Your approach is the right one in my view.

Thanks. You see that's what I thought pasta. But then I thought about inflation over 25 years. Does that not mean a house will be worth more, even if property prices didn't see a big increase?

Look to Ireland to see how badly this can go wrong. Prices have dropped by 60% and people are stuck in unsuitable houses as they can't sell them. I know many people who's lives have been ruined. Be content with living in a house you can afford.

I wouldn't do it again. We bought our current house on interest only at first, because it was a wreck and we needed the cashflow to do it up. It was very depressing realising that our repayments were not touvj

Agg pressed send by mistake

Our repayments weren't making a dent in the capital debt, and so we switched to repayment as soon as we could. Now we know the house is almost ours.

I don't think they lenders will give you an interest only mortgage now unless you can show that you have something in place that should actually pay off the capital at the end. You're being sensible, not silly.

You are not an idiot. Live within your means. Interest only suits only those who are selling on very quickly or people who have some other means of paying off the capital.