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Author Mortgages Repayment or Interest Only?
corsa.in.boro
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Registered: 30th Aug 02
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14th Mar 07 at 20:10   View User's Profile U2U Member Reply With Quote

Im currently looking at getting an 80k mortgage, the mortgage broker can get my monthly payment very low on interest only!!

Is it a big mistake to go with an interest only, and could i do it for say 2yrs then switch to a repayment?

broster
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14th Mar 07 at 20:14   View Garage View User's Profile U2U Member Reply With Quote

i wouldnt bother looking at interest only myself.
Russ
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14th Mar 07 at 20:39   View User's Profile U2U Member Reply With Quote

dont even consider it, my mates doing it with his mrs. in 25 years, they wont own there house...
corsa.in.boro
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14th Mar 07 at 20:40   View User's Profile U2U Member Reply With Quote

can i just switch it in 2 yrs when i can afford it?
Jules S
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14th Mar 07 at 20:49   View Garage View User's Profile U2U Member Reply With Quote

quote:
Originally posted by corsa.in.boro
can i just switch it in 2 yrs when i can afford it?



That's basically the idea. It's never a good idea to go interest only for a long period of time.

Obviously you pocket the increase in the value of the house (if it increases) when you are only paying the interest
corsa.in.boro
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14th Mar 07 at 20:51   View User's Profile U2U Member Reply With Quote

^^Interesting!!
corsa.in.boro
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14th Mar 07 at 20:57   View User's Profile U2U Member Reply With Quote

it can make a 100+ difference a month, and with today's stupid prices its necessary.
Jules S
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14th Mar 07 at 21:33   View Garage View User's Profile U2U Member Reply With Quote

Funnily enough, my partner has 80k interest only.

What are you looking at paying per month?
corsa.in.boro
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14th Mar 07 at 21:52   View User's Profile U2U Member Reply With Quote

380 over 25yrs
Jules S
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14th Mar 07 at 22:52   View Garage View User's Profile U2U Member Reply With Quote

quote:
Originally posted by corsa.in.boro
380 over 25yrs


not a million miles away then.....she is paying 371
Mad Moe
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14th Mar 07 at 23:19   View User's Profile U2U Member Reply With Quote

I'm looking at interest only at the moment, however I intend renting the property for 2yrs and then selling it on for a tasty profit
Rob_Quads
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15th Mar 07 at 00:02   View User's Profile U2U Member Reply With Quote

To say don't bother IMO wrong

Also saying in 25 years you will not own anything is wrong - you will just owe the original amount BUT think about it.

Lets say 100K house - it will be worth ? 1 mill+ in 25 years, you will be earning 200K year maybe so to pay off a 100K dept is not exactly hard.

Your better off getting a house and going interest only for a few years then moving it to repayment than renting and then going for a repayment.

The only thing that would threaten an interest only mortgage is if there was a huge drop in prices and you were made redunant.

At least the house prices are going to stay the same but more than likely still go up over the next few years all beit slower than the last few years.

I bought my house 2 years ago on interest only. I have just moved to repayment and it was the best thing I could have done. I would never have been able to afford a repayment mortgage when I bought, if I had have waited till now to buy I would have had to buy 1 room less due to the higher prices.
Colin
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15th Mar 07 at 00:19   View User's Profile U2U Member Reply With Quote

Dont you need to prove you have some form of endowment policy to get an interest only mortgage???
Rob_Quads
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15th Mar 07 at 01:30   View User's Profile U2U Member Reply With Quote

Thats the theory (well and the law that the mortage company is meant to check) but in the real world no they don't bother.

Even if they did you often just need to tick a box saying you will start up an ISA or something. If you don't the only time its going to matter is if you don't start paying the mortage and they want to screw you over...but thats fairly easy for them anyway as they will just take the house so they are not really bothered TBH
whitter45
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15th Mar 07 at 09:09   View User's Profile U2U Member Reply With Quote

consider a part repayment part interest but inall honesty monthly payments drop only slightly

In all honesty if you can afford it go repayment.with interest only most lenders will ask yo uto set-up a saving scheme type programme to prove yopu will have 80k in 25 years to pay the loan off

Its your call I have repayment myself
Ally
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15th Mar 07 at 11:13   View User's Profile U2U Member Reply With Quote

I have interest only, plan was to buy house, rennovate, sell then take the profits and buy a bigger house with the profits (as the deposit so i could get a bigger mortgage) and switch to repayment on the bigger house and stay there for 5 years+
Ally
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15th Mar 07 at 11:15   View User's Profile U2U Member Reply With Quote

My mortgage is 67k @ 300.66 a month, repayment would of been 398
Fee
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15th Mar 07 at 12:28   View User's Profile U2U Member Reply With Quote

It really depends on what you're plans are for it.
If you are only planning on keeping it for a few years then go interest only.

With a repayment mortgage, you pay the interest off first....so the payments for the first few years will be the interest, and you won't actually start paying off the mortgage for 2-3-4 years.

If it's more long term, then go for a repayment.
John_C
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15th Mar 07 at 12:28   View User's Profile U2U Member Reply With Quote

my plan is the same as ally.

mortgage payment interest only 576, repayment would have been 790 ish i think
Rob_Quads
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15th Mar 07 at 23:10   View User's Profile U2U Member Reply With Quote

quote:
Originally posted by Fee
It really depends on what you're plans are for it.
If you are only planning on keeping it for a few years then go interest only.

With a repayment mortgage, you pay the interest off first....so the payments for the first few years will be the interest, and you won't actually start paying off the mortgage for 2-3-4 years.

If it's more long term, then go for a repayment.


This is not true of most mortgages I have just looked at going through the whole remotgaging process. (in fact not a single one)

If its a repayment mortage you will be paying off some of the capital from the start. The difference is in the first few year the large % of the payment is the interest i.e. Lets say 700/month for 25 years. For the first year you might be paying around 500 towards the interest repayments and only 200 of the balance. Towards the end as you will owe less you will be paying off 650 of the balance and only 50 of interest.

By moving to repayment on a 160K mortgage the first year I will be paying off 4K of the balance. It all counts.
Andrew
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16th Mar 07 at 01:20   View User's Profile U2U Member Reply With Quote

Is it possible to get an intrest only morgage and pay a lump sum in once a year?

My Dad sorted mine out years ago..
--Dave--
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16th Mar 07 at 02:00   View User's Profile U2U Member Reply With Quote

quote:
Originally posted by Russ
dont even consider it, my mates doing it with his mrs. in 25 years, they wont own there house...


this comment made me laugh.

do you own a house Russ?
Russ
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16th Mar 07 at 07:47   View User's Profile U2U Member Reply With Quote

quote:
Originally posted by --Dave--
quote:
Originally posted by Russ
dont even consider it, my mates doing it with his mrs. in 25 years, they wont own there house...


this comment made me laugh.

do you own a house Russ?
will do in a few week,s signing contracts soon.

ok so my commment was a little ott but for me, im buying a house for me my partner and one day our adopted kids (gay couples cant naturally have children iirc). so most people who are buying a house to live in for long periods may be better off with a repayment mortgage.. maybe

/gets coat
Ally
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16th Mar 07 at 08:25   View User's Profile U2U Member Reply With Quote

Long stay = repayment
Short stay/rennovating to sell on etc = Interest only

Long stay = Over 3/4/5+ years
Short stay = 1 - 3 years
Kerry
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Registered: 5th Oct 01
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18th Mar 07 at 11:04   View User's Profile U2U Member Reply With Quote

quote:
Originally posted by Andrew
Is it possible to get an intrest only morgage and pay a lump sum in once a year?

My Dad sorted mine out years ago..


Depends on the lender

Some allow it some dont and some allow you to do it up to a certain % of the borrowing over that and you have to pay a penalty

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