I was lucky enough to be invited to a networking event at the recent league cup final between Manchester city and Liverpool. As a Southend fan, my chances of attending a major final are slim to nil so I jumped at the opportunity.
Before the game I spent time talking to other mortgage brokers who also attended the event. We got onto the topic of interest only mortgages. The brokers I spoke to said they had little or no demand for this type of product which surprised me.
Due to the profile of my clients I’m asked at probably half of my meetings about interest only mortgages. This is due to a variety of reasons including:
* The client intends using annual bonus payments to pay off a mortgage
* They own additional property which will be sold in the future
* They have shares vesting over a period of time which the client intends to cash in
* Simply they’re planning to downsize in the future.
Interest only mortgages are still available via a couple of well-known providers. This does surprise many, as recent media commentary implies this type of loan is hard to find. As a general rule a client would need around £300,000 worth of equity in the property they intend to buy or re-mortgage and loan to value cannot exceed 75%.
Part and part repayment is a method that I personally speak to many clients about. Part and part simply means a hybrid product combining both repayment and interest only mortgages. There are a few High Street banks that are happy to lend on this basis for certain clients. Once again the maximum loan to value is 75%, and clients generally need a minimum income which varies lender to lender.
Only this week, one of the banks that we work with has introduced an 80% part and part mortgage. Typically, 50% of the 80% would be interest only with the remaining 30% on a repayment basis over a term no more than 25 years.
This particular bank only works with a select panel of mortgage brokers which highlights how talking to a specialist broker can open up your options.
For the average person, repayment mortgages are the safer strategy as your debt is always paid back, as long as you make every payment requested by the lender.
However, for some e.g. investment professionals likely to receive bonus income; company directors and sports professionals there is another way and that starts by talking to a broker specialising in high value clients.