swapping to intrest only mortgage

stevie2210

can i swap my repayment mortgage over to a intrest only one till things pick up ???? and how much would it cost . i only had my mortgage since febuary , am a bricklayer and things are a bit tough :mad:

Holeypockets

Hi, I did this with C&G and it cost me £77 to do it. I am snowballing my debts so the difference in mortgage payments goes on the debt. I plan to swap back to interest plus repayment in 2 years time which will cost me around £77 again.

koexelek

Really depends who the lender is.

Some will do it for free, where as other will charge up to £100

stevie2210

its with northern rock .i rather do that for a year or two than lose the house

Jennifer_Jane

As the situation is temporary, why don't you, at the same time as switching to interest-only, also extend the term? Of course this would mean if you didn't pay it back for ages, that you would pay a vast amount in interest, but you sound as if this is very temporary. Having a 40 year interest-only mortgage has enabled me to pay back £43000 in 8 years off the capital, and I'll have the balance paid in a year's time when I retire, but my interest payment is only £100 a month so all bearable until I get money coming through.

Just remember that it may be that you are only able to repay 10% per annum of the capital and that you should send the lender a cheque with a letter asking for the money to come off the capital.

I would never have been able to manage all this over the years without the very, very long-term interest-mortgage, but you do have to be dedicated to paying it off early. Otherwise you're just renting!

Jen
x

koexelek

stevie2210 wrote: »

its with northern rock .i rather do that for a year or two than lose the house

Not too sure whether they charge or not at the moment. They always used to like their admin fees though, before they got into trouble.

At least if you go interest only (with their consent), you should still show as having a 100% payment record on your credit report... which is very important these days.

koexelek

Jennifer_Jane wrote: »

As the situation is temporary, why don't you, at the same time as switching to interest-only, also extend the term?

it would make no difference.

on an interest only mortgage, the monthly payment is the same whether the term is 1 year or 40 years. You are just paying interest on the amount you owe

Jennifer_Jane

koexelek wrote: »

it would make no difference.

on an interest only mortgage, the monthly payment is the same whether the term is 1 year or 40 years. You are just paying interest on the amount you owe

Oh yes, I see that now! Of course. I suppose I was just given this never-ending term to give more time for me to save up for repayment, perhaps. Anyway, the fact is that the interest-only mortgage really did help me through some difficult times.

Thanks

vet8

I agree with that.

We changed to interest only a year ago and our payments went from £1,200 per month to under £600. The difference saved us.

Our mortgage company charged us nothing for it and said that they could do a switch like this any time for free.

koexelek

Jennifer_Jane wrote: »

Oh yes, I see that now! Of course. I suppose I was just given this never-ending term to give more time for me to save up for repayment, perhaps. Anyway, the fact is that the interest-only mortgage really did help me through some difficult times.

Thanks

You're not alone Jennifer_Jane.

A lot of people don't realise that, and I get asked that question several times per week

bubblesmoney

koexelek wrote: »

it would make no difference.

on an interest only mortgage, the monthly payment is the same whether the term is 1 year or 40 years. You are just paying interest on the amount you owe

i understand what u are saying. but it still might be better having a mortgage with a term over a longer period as atleast in that scenario one wouldnt have to run around trying to arrange another mortgage if the term runs out sooner like in 1-2y. if the term runs out then OPs credit situation might be different or worse and might be more difficult to shift to another lender or interest rates might offered might be worse off. so still better to keep a longer term in the mortgage even if u r paying it off faster. obviously bearing in mind any charges they might levy for overpayments etc.

i could have gone for a shorter mortgage term but opted for a 25y mortgage just for the safety factor (but will be making overpayments) and trying to cover all eventualities incase or redundancy or ill health etc changing my finances or to cover for death etc so that it is easier for my OH to keep up on the mortgage.