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  • Mortgages & Finance

    Residential cap. repayment to interest only

    My current residential capital repayment mortgage rate is coming to an end on 30th June. I'm paying 1.79%, not a bad rate.

    Going forward I want to switch to an interest only mortgage on my main residence. I feel that I am disciplined enough to make this work, certainly for around 3 years to see how it pans out.

    My provider, Post Office, does not offer the option of interest only. My best rate will be around 2.09%, with no lending fees of £995 to pay.

    My two questions are:

    1) What providers do you know that are able to help in this?

    2) What experiences does anyone have from having your own residence on an interest only basis.

    I do have 3 buy to let properties on an interest only basis and have a portfolio of stocks and shares so do have some capital to fall back on if required.

    Many thanks in advance.

    Chris

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    I think getting a residential interest only mortgage will be harder to get if at all . But will follow post with interest.



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    Surpisngly, NW, HSBC & Halifax do. HSBC offer up to 75% and the others 70%.

    Fee isn't too bad eiether at £999, but their are restirctions, so prob will not be easy.

    Think the income multiples need to be higher, which kind of defeats the object for most people, worth a check though

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    My impression is that residential IOMs disappeared after Credit Crunch except in exceptional circs - eg where you could prove substantial other assets would be able to repay capital - eg a separate large pension pot with a guaranteed future value (tricky with any money purchase/DC scheme).

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    Yeah, the impression I am getting is that there will be a lot of hoops to jump through. We'll see!

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    I do interest only for myself as I have other business affairs where I choose to run more conservatively (it's not an IHT matter).

    brokers and lenders have been discouraged from promoting interest only on one home but they do exist for the right circumstances.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    HSBC do offer interest on resi mortgages so long as you earn +£100k a year.

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    Residential Interest Only mortgages are freely available for the right circumstances.  Right circumstances being the ability to have a creditable repayment plan in situ.  Creditable repayment plan does not include benefiting from a future inheritance, or planning to make over payments down the line.  A creditable strategy accepted by some lenders is sale of existing property and downsizing at a certain point in time.  To be able to do this, there needs to be sufficient equity in the property now to be able to down size, eg. £150,000+.  Another repayment strategy would be sale of other assets, ie BTL property.  Again, there needs to be a level of equity acceptable to a lender to be able to do this.

    However, why would most people want to trade down to an Interest Only mortgage for their residential?  If you are going to use sale of assets, ie BTL property, you will have to pay CGT on any sale to do so.  Take the pain now and pay down the roof over your head - I can't see the attraction for most people of a residential IO, unless the only other option is a forced sale or repossession.

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    Especially as there is now a pretty small cost differential - at 4% interest around £40 pw saving per 100k of loan for IOM over say 25 yrs - and far less for those eligible for best deals.

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