Interest only v part and part mortgage??

thetigerwhocametotea

I have posted before about swapping to an interest only mortgage for a few years til things improve!! Now we're wondering about moving to a part interest/part repayment mortgage instead so at least we're paying something off the mortgage.

What are the thoughts on this - we'd be looking at either £230,00 interest only or alternatively £100,00 interest only and £130,000 repayment.

Oh I'm so confused at the minute......

kjharve

thetigerwhocametotea wrote: »

I have posted before about swapping to an interest only mortgage for a few years til things improve!! Now we're wondering about moving to a part interest/part repayment mortgage instead so at least we're paying something off the mortgage.

What are the thoughts on this - we'd be looking at either £230,00 interest only or alternatively £100,00 interest only and £130,000 repayment.

Oh I'm so confused at the minute......

It's not clear what your motivations are for wanting interest only. Is it because you want to reduce your monthly repayments or because you think interest rates will come down soon? If it's the latter then don't count on rates being significantly lower in 5 years, they're not exactly high now it's just that we've been used to very low rates over the last 5 years.

You need to start doing some comparisons between costs of each type of mortgage. Use the tool at this link to roughly work out costs:

http://www.moneymadeclear.fsa.gov.uk/tools.aspx?Tool=mortgage_calculator

Bear in mind that any interest only part will need to be repaid at some point! If you're still in doubt, it might be worth consulting a mortgage advisor. I gave that job up a while ago!

thetigerwhocametotea

Thanks for your reply.

We need to cut our outgoings substantially after the end of March (when our mortgage rate increases dramatically) by about £500 per month for the next 3years. Things will be a lot easier after that and we should be able to manage the increased payments ok when we revert to a repayment mortgage.

Our house is valued at £500,000 and we have £270,000 equity in it so I think we should get the mortgage ok? I suppose I don't like the idea of not paying anything off the mortgage for 3 years - and am a bit worried that reverting to the massive payments in 3 years time will be harder than we think! That's why we were thinking maybe part and part is the way to go?