Rate reduction on a fixed rate mortgage?!

Ian_Griffiths_Halifax

Mrs.T.B. Ask the Halifax to change your mortgage to Interest Only. You'll incurr a charge of around £75 which they'll usually add to mortgage if you can't pay it now.

Once it's changed to Interest Only, set up a Standing Order along side the mortgage, to make the payments up to what you are currently paying on Repayment. Then, if you need to reduce your outgoing in the future, you can simply reduce your overpayment, but at least you are still paying something off in the mean time.

Alternatively, if you have any other debt, such as Credit Cards, you could pay the difference between your current Repayment Mortgage payments and the new Interest Only payments off your Credit Card Debt. It will reduce your balance if you have problems further down the line.

caracal_77

CFC wrote: »

35 year mortgage is terrifying. I took a 25 year one and frequently wish I'd only done 20 yrs.

Not terrifying at all. Overpay and see your term shortened. I wish I could have done only one year...:rolleyes:

Gorgeous_George

There is little or no chance of switching to interest only if you are in negative equity already. Paying to switch would be stuid if you were to make overpayments anyway.

When looking at problems like this one I find it easier to put the problems in some kind of order. Your mortgage is fixed so, if that cannot be changed, work on the things that are not fixed - like income. A second or even a third job. Selling stuff on ebay or at car boot sales. Promotion at work or longer hours. There are plenty of ways to increase income. Reduce outgoings. An SOA on the DFW forum would be a good start.

Plan for when the fixed rate ends. It will come round soon enough.

GG

Ian_Griffiths_Halifax

Gorgeous_George wrote: »

There is little or no chance of switching to interest only if you are in negative equity already. Paying to switch would be stuid if you were to make overpayments anyway.

When looking at problems like this one I find it easier to put the problems in some kind of order. Your mortgage is fixed so, if that cannot be changed, work on the things that are not fixed - like income. A second or even a third job. Selling stuff on ebay or at car boot sales. Promotion at work or longer hours. There are plenty of ways to increase income. Reduce outgoings. An SOA on the DFW forum would be a good start.

Plan for when the fixed rate ends. It will come round soon enough.

GG

Changing to Interest Only isn't a stupid idea Mrs.T.B. Ask them, they may say no, but there's no harm in asking. The lenders have a Duty of Care to look at ways to help customers. If this helps you financially to avoid repossession (though this isn't your case yet (fingers crossed)), then it need to be considered. The idea being that if you then overpay you are doing this optionally and not contractually and so you can reduce your payments if you need to.

Gorgeous_George

It helps by costing £75

I'm not a mortgage adviser (nor an IFA) so maybe I'm missing something. However, paying £75 to switch to interest only - simply to overpay by the difference between IO and repayment looks like a waste of £75.

GG

beecher

I don't think it is good advice to go interest only as I think it'd make the option to not pay back the capital too easy. I think GG's advice to cut back in other areas is a far better option - the mortgage should be the last thing to be looked at to save money. The OP should be working towards being able to afford her mortgage in 2010 by cutting back/increasing income.

feisty1

Gorgeous_George wrote: »

It helps by costing £75 I'm not a mortgage adviser (nor an IFA) so maybe I'm missing something. However, paying £75 to switch to interest only - simply to overpay by the difference between IO and repayment looks like a waste of £75.GG

The £75.00 can be added to the loan.........Also if a client was in a position whereby they had to decide whether to pay a repayment mortgage and for example default on a Credit Card, I certainly would be teling them to consider changing to interest only to avoid defaults.........absolutely nothing wrong with interest only as a temp' measure

Ian_Griffiths_Halifax

Gorgeous_George wrote: »

It helps by costing £75

I'm not a mortgage adviser (nor an IFA) so maybe I'm missing something. However, paying £75 to switch to interest only - simply to overpay by the difference between IO and repayment looks like a waste of £75.

GG

If you were a Mortgage Adviser you'd see the sense in it. That's not having a go at you George, it's just that the OP can see the problems in months to come, so to get prepared for it now but still use the Halifax's option to overpay by 10%, will give them the security to know that something is coming off their mortgage but payments can be reduced if needs be later.

Ian_Griffiths_Halifax

beecher wrote: »

I don't think it is good advice to go interest only as I think it'd make the option to not pay back the capital too easy. I think GG's advice to cut back in other areas is a far better option - the mortgage should be the last thing to be looked at to save money. The OP should be working towards being able to afford her mortgage in 2010 by cutting back/increasing income.

Cutting back on other areas and/or increasing income are obvious other areas to look at, but some times it is easier said than done.

Does anybody, including the OP, seriously think that they are still likely to have this mortgage in 35 years time? I don't.

Gorgeous_George

feisty1 wrote: »

The £75.00 can be added to the loan...

That'll help. Not.

GG