Tradefair & Financials
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22 Jan 10
17:32
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Date Joined:
25 Apr 03
Can anybody tell me why mortgage advisers are so reluctant to offer interest only mortgages?
My adviser has recently offered me a fixed rate repayment at 3.59% (2 years) Then Variable rate of 4.4%
This is based on a property in the south east costing 250k with an £85k deposit
Would I be better off approaching the bank directly as my adviser really doesn't want me going down the interest only route....is this because he will receive less commision from the lenders???
Regarding an interest only mortgage, I understand that a payment vehicle is now required, ie, an ISA or savings account...can this be started at the same time as the mortgage or does there need to be already savings within the account??
Any help greatly appreciated here!
My adviser has recently offered me a fixed rate repayment at 3.59% (2 years) Then Variable rate of 4.4%
This is based on a property in the south east costing 250k with an £85k deposit
Would I be better off approaching the bank directly as my adviser really doesn't want me going down the interest only route....is this because he will receive less commision from the lenders???
Regarding an interest only mortgage, I understand that a payment vehicle is now required, ie, an ISA or savings account...can this be started at the same time as the mortgage or does there need to be already savings within the account??
Any help greatly appreciated here!
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Replies: 44
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because the interest rate is at 0.5% at the moment and Banks do not want to offer them
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From what I understand, a Fixed term Interest Only mortgage would be at a higher interest rate than a standard fixed term repayment??
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write renting its quicker and is the same thing
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What is Write Renting ?
cheers |
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instead of putting , interest only mortgages , on top of thread put ,renting ,
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mate Im new to all this, would you care to expand on that....I understand that Im not paying anything off the actual debt, but it would mean Im paying less per month and able to put the rest into some sort of investment and potentially have more than enough to pay the mortgage at the end of the term, and would also mean that Im free to move these investments as and when I see fit??
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People that get IOs
Gotta love'em |
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statman99
Explain mate, Im all ears! |
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soccertrader,
IO mortgages played a big part of the credit boom that led to the crash. They should be banned, and people that want them should be banned from borrowing. Hope that helps. |
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soccer trader if mortgage rates are at an all time low and saving rates are at an all time low what investments do youintend to make to pay off the balance,if you have the money now to save in some sort of investment ,surely it makes sense to pay it off a mortgage while rates are low, have had plenty of people try but cant find anyone to explain the advantages of an iom,ony one being you are allowed for the time being at least to borrow money you cant really afford
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Speaking as a mortgage broker, we get paid the same commission for interest only mortgages or repayment mortgages, The FSA want everyone on a repayment mortages as they dont understand the need for I/O mortgages for some clients, so your adviser is probably just playing by the rules.
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Interest only is fine, we took out 180,000 4 years ago and paid Interest only, did my own investing and in the 4 years have knocked the mortgage down to 130,000 have another 6k to pay off this month and have used some of the money for an extension on the house so its value will of gone up too.
Different people have different ideas so just do what you think is best. |
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Soccertrader
There is absolutely nothing wrong with you taking an Interest Only mortgage if it suits YOU! Dont worry about what others say, as long as you have a plan to repay your loan then no problem. Lenders do not have a problem with YOU choosing Interest Only and nor do the FSA. You know the pros and cons dont you? I have no problem arranging Interest only loans for my customers. Only recently a young lady that I arranged a £200k mortgage 3 years ago on a purchase price of £240000 came in tio remortgage. She had overpaid her mortgage as she intended to do and now owes £176000.. You telling me that she should not have been allowed an Interest only loan. If people are going to moan about IO , they need to appreciate that people that take 30-40year mortages on Repayment basis are in the same boat! |
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if moneytree lays had been backs he could have payed all his off, depends where the young ladys money came from that she used to pay the debt off with,could have been a gift etc,its hardly the right climate for advisors to be telling clients to be making their own investments in shares etc
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what would stop the sed lady overpaying on a repayment lady,surely the most common reason for getting an interest onkly deal is because you cant afford to pay the full returns on a loan at this time,we all no there will be exceptions to thisbut to use these examples as a reason for getting a io mortgage would be misleading
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very funny plenty of winning bets cheers.
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chisel as a layman you still havnt explained to me why in the cases you mention ,the people have the cash to pay down there mortgage so why dont they get a repayment in the 1st place,in a different era i could see the sense of graduates taking a punt on thesalary they may expect to be on in 20 years time but even that nowadays is far from a gimmie
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First Timer
Because that is what she wanted to do!! It is more flexible and she can overpay from bonuses and income. The point is it suited her to do it like this . It has nothing to do with anyone else what she chooses to do! If she decides to have children or loses her job she does not need to find a high mortgage payment. |
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exactly she,s borrowed money in real terms she cant affored to pay back,if i went for a mortgage saying i plan to do no work for 3 years but am hopping to win the lotto or recieve some inheritance i,d be shown the door
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Poster
She has paid off £24000 in 3 years. That is paying the mortgage off a lot quicker than she would be with a 25 year Repayment mortgage. Typical, someone like you making genereralisations that are simply not true. You obviously know nothing about the mortgage market . What gives you the right to say for certain what someone can afford? |
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so whats stopping her overpaying on a repayment mortgage
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what gives you the right to say what someone can afford, wasnt that the mantra in america before the subprime mortgage hit the world
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I can afford to pay the repayment mortgage but decided that it was worth taking the io one because I could over pay and use the extra money to generate my own investments in attempt to pay off faster.
so far so good. |
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so if i can carry on like this i pay it all off in 12 years approx rather than 25, seems simple really.
but each to their own. |
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no one has explained why you cant pay off extra on a repayment mortgage
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You can but the repayment was around £800 and io £500.
I used the 3300 difference to do my own money making and so far so good. new deal needed soon so wil lgo for io again and carry on. Only myself to blame if cant pay it off but not worried yet. |
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Poster
Of course you can overpay any mortgage, but iot suits different customers to pay their mortgage back as it suits them. It works well for money tree and it works well for my customer. It does not work well for everyone. What I am saying is that you can not say that everyone that has an Interest only mortgage is the same. They can work very , very well for people. By the way. I suggest you read up a little on pensions. Teh adviser you saw should be able to explain to you in plain English how they work. If he can not do that I suggest you speak to a different adviser. Pensions are not complicated if you speak to the right person . |
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pensions confuse me!!
not updated mine for 10 years lol next job on the list :-( 2019 should be ok !!!!!!!!!!!!!!!!!!! |
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Sounds good Monbey tree!
Must admit that I aim to pay my mortgage off instead of paying into a pension. If i can get rid of that nasty mortgage sooner rather than later , I may start ferreting away a much bigger nest egg for retirement. |
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nice one chis;money;io great idea for many beats renting;but as you say some people just cant or wont learn.....wished i avoided endownments 25 year ago .....
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Crediter
Not all endowments are as bad as others, but I think the point is that Insurance companies continued to sell them after their sell by date. The maturity value of policies with companies like Prudential for example and companies like Abbey life and , Countrywide |
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at the time ;81 s.life were top of the end.league..recommended by charcol ......est. mat value 180k....now 28k.......theyre nearer the bottom now............my advice buy any property.
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Anyone who takes out an interest only mortgage clearly lacks the mental capacity required to enter into a binding contract.
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not if he owes a fair amount on cards......pays them first then switch to repayment.....so not so silly...lol.
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whys that overboard?
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Money tree
Overboard has not got a clue. He can not understand that Interst Only is ok for SOME people! I guess he would rather rent! |
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interest only deals every time
build societies will push you toward what is best for them , always take what they dont want you to have - see endowment mortgages , oh the repayment terms are the same and you get a big lump sum at the end for free. nothing is for free banks and societies are pure sales oriented and never to be trusted or believed When the average joe takes out a mortgage its at a time when their personal disposable income is low therefore tailor your repayments to a minimum by being interest only. Dont be scared by any stories about not being able to pay off your mortgage in 20 years , your mortage is being paid off by inflation , in 20 years the residual sum will be a weeks wages Anyone not on a IO is a mug Anyone on a SVR is a mug If your a mug dont discuss it further with me , just sort your life out |
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agreed IO is fine
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wise words old ace
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