Interest only mortgages? Views/advice needed...

[Yuwipi Woman]

Definitely go with fixed rate over variable rate. The interest rates are rising so I'd lock in a lower rate now. You may be paying 6% now, but you could be paying 12% in a few years. You can always refinance at a lower rate later.

I wouldn't like an interest only mortgage either, but that comes from my personal outlook on debt--I detest it.

 

[llantwit]

The idea is to switch to a repayment mortgage when my employment situation is more favourable in 2 years time.
I'll be going for a fixed rate capped for two years, and remortgaging in two years time.
About to take the plunge.

 

[gloryhornetgirl]

I'm very confused by this.

You're going to take out an interest only mortgage with no endowment or other savings plan? I didn't even know that was possible.

 

[Idaho]

I have a interest only. Don't worry about it too much in the very short term. Just take some time over the next year to really look into the various investment options, and how to build up some money. You'll be fine

 

[prunus]

My wife and I are thinking of buying a house for the first time, and are looking into the dizzying world of mortgage advice...
Basically - we're both in decent-paying jobs (although mine is a short-term contract) and have recently been to an independent financial advisor to see what we could get.
He came up with two options (both variable rate 25 year mortgages):
A repayment mortgage on a £130,000 house in Cardiff would cost us around £830 a month at current interest rates.
An interest only mortgage would cost us £606 a month for 3 years rising to £741 a month after 3 years (taking into account a discounted rate on repayments for the first 3 years at current interest rates).


Now as I understand it if we went for the interest only option we'd be paying interest for 25 years, and then at the end we'd have to come up with the capital sum (£135,000) or have our house repossessed.
Now, here's the rub. We don't want to be there for 25 years - we only envisage being there for up to 5 years.
Do peeps think it a feasible thing to do to take this mortgage, sell after 5 years, and pay it all off, and then start again with a better mortgage at the next house. We'd be using the interest only jobby as a way of getting on the housing ladder, effectively. Is this an incredibly risky thing to do? Are there pitfalls that I might not know about (beyond interest rates rising and priing us out of our own motgage - that's one pitfall I do know about)?

You don't say how much deposit you have - but if it's more than nothing then those rates (from your mortgage guy) don't sound that great, unless you are going for a massive income multiple? - what are the % rates he is suggesting you go for?

For instance if you have a 10% deposit you could get a repayment mortgage fixed at 4.99% for 2 years from the Halifax - monthly repayments of £760; or if you're determined to go interest-only then payments of £540.

Even if you only have a 3% deposit you can get 5.65% fixed for 10 years (£810 per month repayment, £610 interest-only), or 4.99% 0.49% variable tracker above base for 2 years (payments as the 10% example above).

It's a big purchase - don't do it without shopping around.

(Of course I don't know your circumstances etc - apologies if you have already done all this and so on, just trying to help if possible).

I should add that I'm not a mortgage advisor or anything - these are just the opinions of a fellow mortgage-sufferer.

 

[moonsi til]

I took out a interest only to buy my flat in Dec 05. I have a fixed rate for 2 years and plan to go on repayment after that period. For me the interest only meant the same as I was paying in rent and it has got me on the property ladder. I am paying off debts and by the time I switch to repayment I should all going according to plan be debt free and be in a better position. I have an ISA but its a paperthing only. Good Luck