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Saving to start - Residential Interest Only?


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Hi all

Im currently saving up to get to a financial position to be able to start investing. 
 

Just wondered if anyone had any advice/thoughts on changing my residential mortgage for the house where I live from a repayment to an interest only mortgage to reduce the monthly payments and speed up the savings process. The plan would be to change back to a repayment at some point in the future once I’ve got enough capital to get started with the investing. 
 

Any thoughts would be appreciated. 
 

Jack

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Hi Jack

When I have looked in the past IO mortgages for your home aren't as easy to come by compared to for BTL IO mortgages. I recall you needed a combination of high salary and high amount of savings.

Are there some ways you can explore to earn more money?

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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Hi David

We have a below 75% LTV and as there are two of us a relatively high salary. We have about 30k in savings but that is for our wedding. Im not sure if that would be acceptable or not? 
 

Supposing we were able is there anything else you think we should consider?

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Hi Jack, 

Moving to IO could certainly be a good way to save more money.

David is right though - getting an IO mortgage on a residential property is harder these days. A lender will typically want you to have a lot of equity in your home (circa £200k+) and often also be a high individual earner too (£100k+). Having said all of that- lenders always change their criteria, so it would be very worthwhile having this conversation with at least 2 mortgage brokers to see what is possible. If one broker says it's impossible, another may find a way, so always good to get a second opinion...

If you do have lots of equity in your home, a far easier option may be to release that equity to buy now, rather than waiting to save.  This is how lots of investors get started building a portfolio. 

Martin 

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6 hours ago, jack_k said:

Hi David

We have a below 75% LTV and as there are two of us a relatively high salary. We have about 30k in savings but that is for our wedding. Im not sure if that would be acceptable or not? 
 

Supposing we were able is there anything else you think we should consider?

You really need a conversation with a mortgage broker on this. When I enquired some time ago they wanted six figure salary and enough savings to pay off the mortgage! I had special circumstances though which may have narrowed my options with the broker though.

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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Make sure your savings are working hard for you. Are you saving in cash or into a stocks & shares ISA? If you want your savings to grow at all I would recommend regular saving into a stocks and shares ISA - this will almost certainly beat cash over any length of time. Even with the stock market crash this spring, many funds have produced good returns this year. Saving monthly allows you to benefit when the price falls by buying more units & when it rises by making more profit.

Just checked my sons ISA in Fundsmith - £4000 invested 7 years ago now worth £13,600 :)

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On 12/13/2020 at 11:59 AM, julia urquhart said:

Make sure your savings are working hard for you. Are you saving in cash or into a stocks & shares ISA? If you want your savings to grow at all I would recommend regular saving into a stocks and shares ISA - this will almost certainly beat cash over any length of time. Even with the stock market crash this spring, many funds have produced good returns this year. Saving monthly allows you to benefit when the price falls by buying more units & when it rises by making more profit.

Just checked my sons ISA in Fundsmith - £4000 invested 7 years ago now worth £13,600 :)

Mad return that, fundsmith has certainly gone great guns since launch. I’ve opened a fundsmith account, who knows if it’ll grow at the rate it has over the last 7 years though

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