Page 2 | Interest only mortgages: your success and horror stories please

KievLoverTwo · 2023-05-28T16:36:37+00:00

So we're not looking to buy at the moment before you jump all over me saying DON'T, FOR THE LOVE OF COD, DON'T DO IT But There is a thread going elsewhere where someone's considering it and a few people have said it absolutely worked well for them. So, because I don't really know a great deal about them, I'm asking you folks here for your experiences/those of friends, family, etc. Probably when we do buy, my OH absolutely wouldn't want to go for it, he's very risk adverse (as am I, but a teeny bit less so). But I'd like to hear all the reasons why it would be the worst idea in the world (or not) please!

Happiestathome · 30/05/2023 21:01

We switched to interest only after a couple of years as I didn’t want to return to work full time after having our first child. We never switched back. I would say you must be disciplined in saving up to repay the capital and not dipping into it. We did well as we made more in interest than we were paying so we held back on paying it off until earlier this year when mortgage rates went up.

Legoandloldolls · 30/05/2023 21:02

I have had two interest only mortgages. You need a solid exit plan. Our btl was repayment but we remortgaged it to buy another house with the capital as deposit. So, at some point we sell the btl and the increase in market value pays the mortgage off and the capital gains tax. But we have a fair share of equity to play with. It's a gamble. Depends how you view risk. For us it was big risk, but for us it's given us 150% returns so far

Freetodowhatiwant · 30/05/2023 21:06

The first place I bought, 2003, was on an interest only 105% mortgage. Thanks Northern Rock. I wouldn’t have been able to buy without it. I was only there 3 years before it shot up by 100k and I was able to sell and upgrade to a two bed with a garden. I’ve now owned that second one for 17 years, now as a BTL and have never paid off any of the loan. I have around £250k in equity in it so to me Interest only has been very helpful. There were times when the payments were a struggle 2008-9 and times when they’ve been very little but overall it’s been a great investment.

coldiris · 30/05/2023 21:07

Had interest only for the first 2 years, then full repayment. Worked well for us: in the early years, it was just my husband who was working, then later I got a job too so full repayment made sense then.

MorbidMuch · 30/05/2023 23:17

We had interest only in the first few years back in 2005. My husband was self-employed on variable wages and I was temping. Interest rates were higher back then than our current fix. It got us onto the property ladder. Once I was in a stable job we were able to switch to repayment on a lower interest rate than we'd been before so ended up paying not much extra per month. We hadn't set up endowment. Our plan had originally been to do up and sell, then buy another doer upper and repeat, but circumstances changed. Luckily, getting stable employment was enough to get us out of a potentially sticky situation.

Peakypolly · 30/05/2023 23:28

Having our own business, we took the risk of an interest only mortgage, with the plan of ultimately selling the company.
This allowed us to live in an expensive property and still have income for school fees and other expensive life choices.
Thankfully it all worked out, and we bought the house outright aged 49. It was a calculated risk, but we were confident our business would do well.

bathty · 30/05/2023 23:37

I know a few people who worked well for because their properties went up hugely however that was people who bought yrs ago.

The ones I know who do it now have high salaries & lots of equity & see it as a better form of renting.

Wiccan · 30/05/2023 23:48

It worked well for us , we payed a regular lump sum off ours . We will have paid off completely in a few months and overpaid it so will have a nice amount coming back to us 🙂

whirlyhead · 31/05/2023 06:56

Interest only on my property I’ve lived in for 20 years as I’m self employed. The idea always was to sell up and downsize as the house is bigger than we need and we have a lot of equity in it now. We are now moving and will have a repayment mortgage but not a huge one.

I have several BTLs on interest only which has not worked so well as they all have cladding/fire safety issues and are not remortgagable or sellable until these issues are rectified. They are all now on SVRs and I’m having to subsidise them all quite a bit (about £1500 a month). The idea was to have sold them by now but the government buggered that one up…

Worldgonecrazy · 31/05/2023 07:02

We have one but are also paying down the capital hard. It has been useful as it allowed us to flex how much capital we pay each month.

CloudlessSunnyDays · 31/05/2023 08:30

I bought a propert at auction, intending to do it up, sell it & move up the ladder. I had a mortgage hood to go. But it was 2009 & Abbey withdrew all mortgage offers overnight. My broker phoned me as I was entering the auction. She scrambled around while I was waiting for my lot to come up, found a mtge with RBS but it was 6%, (I think Abbey had been 3.25% from memory) the lot was up & I didn't feel I had much choice so I accepted it.

I won the auction (& for a few thousand below what I'd offered the owner when the property was for sale ordinarily)

After the 2/3 fixed period was up I went IO so I could use the extra money to do the renovations.

unfortunately then life went tits up, and a while after that I went onto a repayment mortgage.

unfortunately the 'life went tits up' meant the renovation came to a halt and 13 years on I'm still in the (half renovated) place.

I should have really moved to an offset as I have some savings in another account, but at the time my interest rate was low and I thought I'd spend the money quite quickly doing the renovation ....anyway, I could ramble for hours, bottom line is, I didn't get out of the IO what I had planned as life happens, & if I hadn't done it my mortgage would be a lot lower, maybe even paid off.

But I don't regret the IO period because if life hadn't happened I could have been in a better place. I never risked losing the place, my mortgage is affordable and no landlord can ever serve me notice.

IO is a balanced risk & fine if you know what your doing. It's catastrophic for people who don't understand them & think their capital is somehow being paid because they're paying their mortgage, get to the end and are shocked they still owe the bank the cost of the house. How those people get a mortgage in the first place astounds me. How they don't understand when the broker/mortgage company goes to pains to explain how it works.💁🏻‍♀️💁🏻‍♀️

CloudlessSunnyDays · 31/05/2023 08:32

whirlyhead · 31/05/2023 06:56

Interest only on my property I’ve lived in for 20 years as I’m self employed. The idea always was to sell up and downsize as the house is bigger than we need and we have a lot of equity in it now. We are now moving and will have a repayment mortgage but not a huge one.

I have several BTLs on interest only which has not worked so well as they all have cladding/fire safety issues and are not remortgagable or sellable until these issues are rectified. They are all now on SVRs and I’m having to subsidise them all quite a bit (about £1500 a month). The idea was to have sold them by now but the government buggered that one up…

@whirlyhead I'm sorry to hear about your situation with your BTLs, it's a disgusting situation & I hope it's all sorted in a way that works for you, very soon.

Original poster

KievLoverTwo · 31/05/2023 08:49