Posted on 18 May 2012 by Chris
I am looking to buy a house valued at £250k (recently dropped from £270k). I have a house to sell for £190k which I currently have £75k of mortgage left to pay with Santander. This is split over £67k @ 1.5% and 8k @ 4.99%.
To cover the moving costs my maths says I need a further £70k borrowing. To keep cashflow I want to borrow this extra £70k interest only, so as to free up cash for the next 24 months until my wife is able to increase her part time hours.At this point I would revert this back to repayment. Is this a bad idea, and generally would a lender like Santander be open to this? I know they have recently tightened rules with IO loans but my risk would only be 28% of the value of the property and 48% of my total mortgage. Having never invested a huge part of my salary in property, and faced with the chance to buy a recently massivley reduced priced house am I in danger of trying to have my cake and eat it? Phew!
You may want your cake and eat, but in this case I don't think you are going to able to. Santander have tightened their interest only policy so that they will only consider lending up to 50% of the property value (LTV) and if you wish to use the property as your repayment vehicle there must be at least £100k equity. Any more than 50% LTV and the whole mortgage must be on a repayment basis. This would mean finding an additional £20k from somewhere.
I presume that you wish to stay with Santander because you can port your existing low interest rate to the new property? You won't get a better rate than this currently and unless it is shortly to expire I think this is your best way forward even though you may habve to take the whole mortgage on a repayment basis.
If you wish to explore other lenders interest only criteria and their mortgage rates please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to help you.
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