Payment Holiday - Good Idea right now?

Feanor

Hi,

My OH and I are going through a break up at the moment and trying to think which way is the best to do things.

I would like to keep the place, but the mortgage at the moment is too much for me to pay by myself. I could swap the mortgage over to interest only (about £950 a month) and then rent the second bedroom out for £400 a month. I could then pay the rest and be ok. It would be tight for a while but not too bad.

The only problem is, I need a good month or so to get the place in shape for a lodger and we were under going quite a bit of work to the place.

The other option we have come across is to take a payment holiday for a year. In this time, I would not have to worry about the mortgage but would still put money away every month and rent the second bedroom out. I would then save all this money up, and at the end of the year, pay a big lump sum off the mortgage. After the year, the payments (interest only) would be about £1180 a month, but if I pay off the lump sum the payments should go down considerably as this would get paid off the amount I owe, not the interest...right?

Could anyone advise if this is a good plan or not?

Our mortgage is with Nationwide, does anyone know with their payment holidays, do they let you pay nothing or do you usually have to pay a certain amount each month?

Thanks!

pinkshoes

Firstly, will the mortgage company allow you to take the mortgage on your own? i.e. is the mortgage no more than 3.5x your salary, and do you have a decent amount of equity i.e. at least 10% after you pay your OH out?

If no, then it might be best to sell and have a clean break from your OH.

PasturesNew

Feanor wrote: »

...take a payment holiday for a year ... put money away every month ... save all this money up, and at the end of the year, pay a big lump sum off the mortgage. After the year, the payments (interest only) would be about £1180 a month, but if I pay off the lump sum the payments should go down considerably as this would get paid off the amount I owe, not the interest...right?

No.

While you are taking the payment holiday and saving the money, the interest is being added to the mortgage still, so you end up owing more after the holiday than at the start. Each month you are increasing the debt.

The money you save and pay off will be less than the amount the debt has increased by.

Feanor

My OH is going to stay on the mortgage and then I will rent out the second room.

If the interest is £960 a month, then over a year I will pay £11,520...but none of this will be paid off the amount I owe.

If I rent out the second room for £400 a month and put £600 a month away, I will then have £12,000 to pay off the amount I owe.

I just dont know what the best thing to do is. Maybe I should just switch to interst only and struggle for a couple of months until I can get the place ready for a lodger.

I dont think we should sell right now. I am not sure we would get what we paid for it. We paid a 5% deposit when we moved in.

Hmm...this is so hard!

pinkshoes

By all means take a holiday payment, but make sure you put all the rent and money saved into an ISA and high interest savings account.

Are you sure your ex will want to stay on the mortgage?

Would you make more money by renting out the biggest (your??) room and taking a smaller one for yourself?

Could you take on another job to help with the payments?

You should at least get the house valued, as if your ex is going to stay on the mortgage, then what will happen when you do decide to sell i.e. if the price drops from when he moves out to when you sell, who is going to take the loan to cover the shortfall?

If I were your ex, I would not want to stay on the mortgage.

It's usually best to cut your losses and have a clean break, and if you're going to struggle to just pay the interest section, then I'd say it could be really tought and a bad idea.

Feanor

He has said he will stay on the mortgage and any maintenance or things that need improving, we will split 50/50 cost. Then in a few years time if we want to sell, we will take out any money I have spent and split any profit/loss in an appropriate way.

He says he is happy to do this as he doesn't want me to lose my home or my money (I paid the deposit).

barnaby-bear

Feanor wrote: »

He has said he will stay on the mortgage and any maintenance or things that need improving, we will split 50/50 cost. Then in a few years time if we want to sell, we will take out any money I have spent and split any profit/loss in an appropriate way.

He says he is happy to do this as he doesn't want me to lose my home or my money (I paid the deposit).

OOoooh he may say this NOW and may believe it... but a few months down the line when little-miss-new-girlfriend-fluff turns up on the scene she's going to want him to get his 'entitled to' share (including anything you've paid off since - oh and in this scenario nad her head houses only ever go up in value), resent any maintenance costs (you live there not him), will want them to get their own mortgage which will necessitate him being off yours.... get a good scolicitor and everything in writing now and above board before little-miss-bit-of-fluff appears....

Feanor

I know, I agree...

Unfortunately little-miss-fluffy-pants has already appeared, which is the reason for the split.

I am going to see a solicitor to get it all in writing. Or would the CAB be able to help?

Feanor

I could rent out the bigger room I guess, that could be a good idea. The second bedroom is a good size double though.

I dont think getting a second job is really feasible. I work full time in central London...get the train at 7.30am and back home for near on 8pm. Maybe I could do something at the weekends but by the time I am taxed on a second job i dont know if it would be worth it!

pinkshoes

I'd say it's still best to sell and have a clean break, especially if little miss fluffy pants is on the scene!

How much is the mortgage, how much is the house worth, and how much do you earn? You could TRY putting it on the market to see if it would sell.

Was your ex going to owe you for half the 5% deposit you put down? As no doubt if the price had gone up massively, he'd be wanting half the profit!

barnaby-bear

Feanor wrote: »

I know, I agree...

Unfortunately little-miss-fluffy-pants has already appeared, which is the reason for the split.

I am going to see a solicitor to get it all in writing. Or would the CAB be able to help?

Ooooh fluffy-pants means everything he says is just pretty noise - he obviously can't be trusted the reason for the split has proved that.

Solicitor... CAB good for those at the bottom of the heap who need to know basic rights but for the best deal for you - you need a professional not a volunteer and a specialist in divorce/housing....