Interst only mortgages

Evenin' all,
I am considering buying a house requiring, "modernisation".
In order to allow adequate cashflow I am considering:
-An interest only mortgage at the maximum I can borrow.
-then a home loan (at mortgage rates) to pay for renovations.

My idea is that I can go interest only for 3 years. The repayments on approx. E280K will be about E650 pm as opposed to E1100 on a repayment mortgage. Then take out a home improvement loan of approx. E60k to cover refurb costs at about E4 per E1k will mean I am paying less than a repayment mortgage per month. Hopefully in three years my salary will have increased enough when the interest only stops.

I am a professional civil servant with wages on an increasing scale.

Does anyone think banks would go for this given that the 280k is the maximum I can borrow.? Has anyone done this before and with which institutions?

Any help appreciated.

It is not clear to me why 280K is max you can borrow. If your income is sufficient to cover 340K but the property in current condition is 280K then I think most lenders will look at your proposal. You could do Interest Only for 5 years and the money could be released in stages as the value of the property increases.

If your income will only currently covers 280K then you might not be able to borrow the additional money till your income increases. If the property is not fit for habitation, during Winter months, based on current conditions then proceed with caution. I have seen a couple of situations where the borrower was snowed under with unsecured borrowings trying to complete a property which was in need of repair.

Thanks for that. Are IIB the only ones who do interest only? AIB seem very reluctant to do interest only even though I've banked with them for overe 10 years.

No, IIB Homeloans is not the only one doing Interest Only. Others include First Active, EBS, Bank of Scotland. Some may limit the interest only period to say 5 or 10 years, but that serves your purpose.

ptsb and boi too

Interest only depands on wheather you are FTB or not. Most mortgage lenders will not go for 5 to 10 years interest only for FTB. If investment mortgage or remortgage most will!

Regards,
Anthony


anthony@advicefirst.ie

Thanks all for the information. The maximum I am allowed to borrow is circa. E310k. The house in question is 285k. I need approx 70k for refurb costs so the shortfall is 45k. I am considering re-mortgaging my parents home for this amount. If I go interest only for 3 years with the 285k it will cost approx. 600 per month the remainder borrowed aprox. 400 per month. Do you think lenders will go for this?

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