Bought in 2007 on an interest only mortgage...still on it and now looking to move!

[propertyhunter]

Hi,

Long time lurker here!

So we bought out flat in 2007, had bid (and lost out on ) 8 properties before we paid out max budget to this one. We were 23 and 24 at the time and went on an interest only mortgage.

14 years, a marriage and 2 kids later we are looking to move, as the properties in the area are now exceeding what we paid in 2007.

We have been on interest only all this time (trust me- it makes me feel ill every time I think about it)

We have been paying £600+ for the last 6 years on childcare but the youngest turns 3 this year so thankfully we will see that reduce dramatically.

We live in a very expensive city (Scotland) and the property market is just mental here- people paying 20k plus over the home report value.

We would probably have around £14k for a deposit after fees which wouldn't get us anything bigger than what we have at the moment.
We could borrow up to £280k but would need some help with a deposit- and I'm dreading asking my parents as they helped out with £5k on our current property!!

We've started looking out of the city but even then, those areas have been growing over the last 5 years and are starting to look unattainable.

Help to buy Scotland can help on a new build property but only up to £200k, you would maybe get a 1 bed flat for that so that's useless!

Over the last year we have been overpaying on the mortgage around £500 per month

Is anyone in a similar position? We are almost like first time buyers again but without any financial assistance- which is grim!!

Thanks for reading - didn't realise the post would be so long!

So, has your current property only gone up in value by 9k in the past 14 years (allowing for your 5k deposit at the time of purchase)?

That seems odd given what you describe about the property market around you.

Could you keep the property that you have but on a repayment mortgage and rent it out whilst you rent something else that suits you better for now?

@Ikeameatballs

So, has your current property only gone up in value by 9k in the past 14 years (allowing for your 5k deposit at the time of purchase)?

That seems odd given what you describe about the property market around you.

Could you keep the property that you have but on a repayment mortgage and rent it out whilst you rent something else that suits you better for now?

We paid over the odds for it- probably £10k over what others went for. We are in an area which is heavily council properties and will be for first time buyers or investors, so it will have a ceiling limit. And we bought in 2007 so before the market crashed! It's taken this long for us to make a profit

I bought a property with northern rock mortgage in summer 2007 too 😂

We were not to know eh.

@Daisydoesnt

With an interest only payment you can usually overpay by 10% a year and the overpayment reduces the capital outstanding

But surely that’s just ....a repayment mortgage?

Many people use them to move up the property ladder to house a family, then sell before the end of the term to clear the mortgage and downsize using the capital

That’s all very well, but when house prices go down there may not be enough to clear the amount owed. It’s an incredibly rickety strategy, and definitely not one that would let me sleep at night.

Generally these are at a lower loan to value mortgages and have been used strategically by people in London and the SE where they have seen massive property increases but as you say a risky strategy, but if coupled with lump sum payments too can work well.

Interest only mortgages with lump sum payments are not repayment mortgages as that has a contractual obligation to make some form of capital repayment every month. Interest only mortgages you only have to clear the capital at the end of the term althoigh the sensible thing to do if you can is to clear parts as you go along.

Op i've just discovered a friend of mine who is coming up to retirement age has an IO mortgage and no way of re-paying the balance, and not enough equity to take out a loan against it to enable him to stay there so he will lose his home, you're over halfway through your mortgage with 11 years left and still have 90% LTV? so maybe you need to talk to a couple of IFA's or WOM brokers to see what options you have - don't leave it until you're coming up to retirement as my friend did.