interest only mortgage for FTB and other Qs!

D

damson

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Hi,

I've recently inherited a (share of a) house and some money. The house will be sold and the proceeds divided, but probably not until the autumn. I've already received the inherited money. I'd like to buy this season if I can, as house prices still seem to be rising.
My plan... Take out an interest only mortgage for a large sum. My salary will be enough to cover the interest only repayments (though not to repay any principal). Then, when the inherited house is sold, use my share of the lump sum to pay off a good chunk of the principal. The interest only payments required will therefore decrease dramatically, but I will continue to pay as much as before - enough to also pay off the remaining principal over the mortgage's term.

(a) Is this plan a runner, or am I missing something obvious?

(b) Am I still a first time buyer? Everything I've read suggests that I am, even though I'm not a first time owner.

(c) Can anyone please tell me who would offer an interest only mortgage to a first time buyer? Do the % rates offered differ from the % for regular repayment mortgages?

Would really appreciate all help!
 
BOS Ireland offer interest only mortgages on principal primary residences but the LTV ratio must be 80% or better - You don't have to pay anything off the principal until the end of the term. If you have LTV of 60% or better you will get a better rate from them. As I understand it their lending criteria re. income is the same for repayment or interest only mortgages but because you are due an inheritance you may be able to borrow a " big sum " relative to your income.

(a) Is this plan a runner, or am I missing something obvious?

See above.

(b) Am I still a first time buyer? Everything I've read suggests that I am, even though I'm not a first time owner.

You have me confused on this one.

(c) Can anyone please tell me who would offer an interest only mortgage to a first time buyer? Do the % rates offered differ from the % for regular repayment mortgages?

See above. The rate you get will depend on the LTV ratio. The tracker rate will be in the region of 100 basis points above the ECB base rate.
 
Damson,
Most of the banks will give a decent interest only period - up to five years, so this should give you enough breathing space to do what you need
 
Thanks everyone - v. useful info.
Most of the banks will give a decent interest only period - up to five years
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So IIB and BoS (Ireland) have formal interest only mortgages listed, but I should be able to plámás one out of the others - say BoI or NIB (my existing banks)? Do you think they'd give me the same rate as their regular repayment mortgage rate - I know NIB have a good rate at the moment?
(b) Am I still a first time buyer? Everything I've read suggests that I am, even though I'm not a first time owner.
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You have me confused on this one.
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I'm just wondering whether (for mortgage interest relief etc.) I'll be recognised as a first time buyer or not. This will be the first time I've bought a house. However, as mentioned, I have inherited a share of a house and I'm not sure whether this part-ownership will jeopardize my FTB status.
 
damson said:
Thanks everyone - v. useful info.

So IIB and BoS (Ireland) have formal interest only mortgages listed, but I should be able to plámás one out of the others - say BoI or NIB (my existing banks)? Do you think they'd give me the same rate as their regular repayment mortgage rate - I know NIB have a good rate at the moment?
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In a word - yes! Just tell them that you will struggle a bit in the early year or two, so interest only would do the job. The rate should not be affected by this at all.
 
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As to whether or not you are a FTB- check with the solicitor handling the estate as to whether the property will be sold by the personal representative in such capacity or whether it will be first put in the names of the beneficiaries and then sold. The first option will ensure you remain a FTB, the second will not. If the plan is to do it by the second option, can you contact the per rep and ask them to do it by way of the first option so that you dont lose your first time buyer status.
 
Unfortunately, I think it's a bit late for that... probate has already been granted and the solicitor has already started drawing up documents to convey the property to us (siblings who have inherited). The executor is elderly and in poor health, so we don't really want him to have to do more than necessary anyway. But I'm still not sure that inheritance of a house share should remove my FTB status anyway, as I won't have purchased or built a house on my own behalf.

From [broken link removed]:

Who is a first time buyer?

A first time buyer is a person, (or, where there is more than one buyer, each of such persons):

  • who has not on any previous occasion, either individually or jointly, purchased or built on his/her own behalf a house (in Ireland or abroad) and
  • where the property purchased is occupied by the purchaser, or a person on his behalf, as his/her only or principal place of residence and
  • where no rent, other than rent under the rent-a-room-scheme, is derived from the property for five years after the date of the current purchase.
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