I have an interest only mortgage, what type of savings plan do I need to ensure ability to repay the mortgage?
Answer:
You need to find a fixed rate 15 yrs mortgage fast. If this means you and spouse getting second jobs - do it. The banks win the house back in next 2 - 4 yrs.
If you don't qualify for above, sell the house and get something you do qualify for.
You bought a bankers scam, they win.
visit DaveRamsey.com to learn what the banks don't want you to know/learn.
you need cash fast. Best savings plan pre pay principle only. beat CD's , saving s in banks and even mutual funds for short terms like what you are talking about.
If you think i'm negative about where you're at ? Right.
see below
an ISA
It would seem that maybe instead of saving money for a future payment date, you might consider just making monthly principle payments. Here's my thinking:
If you're paying 6% on a home mortgage, and you're putting money into a savings account that only makes 4%, you're going to be paying 6% per year on (let's say) $200,000, and only gaining 4% per year on a much smaller amount.
Making monthly principal payments would not only reduce the principal amount, but would also save future interest that you'll be paying on the mortgage.
Unless, of course, you could find a mutual fund that would return you a much higher yield. But there's no guarantee with the stock market. And that higher yield would still be on a much smaller amount.
You'd have to actually run the numbers side by side to see what the final totals would be. But paying on the principle would be my vote.
Good luck with whatever you decide!
Only by switching to a repayment mortgage and maintaining the repayments can you guarantee that the mortgage will be repaid.
Any other savings plan you will have to take a stab at the investment growth over the remaining term and if that level of growth is not achieved you will have a shortfall, hence the current concerns with endowments.
An ISA may be tax free but there is a limit to how much you can invest each year (which may not be enough to repay your mortgage) and there is no guarantee what the growth will be. ISAs can plummet in value if the stock market crashes.
a private pension plan
Speak to a professional - mortgage advisor, IFA etc. Finding yourself short of funds at the end of the mortgage term is not a position you want to find yourself in!
Good Luck!
The answers post by the user, for information only, BAnswer.com does not guarantee the right.
Other Questions and Answers: