Baby on way, need to reduce mortgage payments - advise please.

mentat72

Hi all, I'm looking for a bit of advice...

My wife and I currently have a 5 year fixed mortage with the Abbey, 2 years into it with around 18 or 19 years left to pay. We have our first child on the way and need to reduce our monthly payments.

What I would like to do is to talk to the Abbey and see if we can keep the existing mortgage but increase the term up to 25 years, this gives us a little more breathing space each month, they gain more by charging more interest too. I haven't approached them yet.

I just wanted to know other peoples thoughts and see what they thought we could do.

Thanks for your help.

_Andy_

Two ways to reduce it would be 1) as you stated, increasing the term - give them a call to do so, just be aware you'll be paying back more interest in the long term.
2) Switch from capital repayment (I'm assuming that's what you're on at the moment) to interest only. Downside with that is you wouldn't be repaying back any of the mortgage balance as you go.

mentat72

_Andy_ wrote: »

Two ways to reduce it would be 1) as you stated, increasing the term - give them a call to do so, just be aware you'll be paying back more interest in the long term.
2) Switch from capital repayment (I'm assuming that's what you're on at the moment) to interest only. Downside with that is you wouldn't be repaying back any of the mortgage balance as you go.

Thanks for replying - would there be a large remortgage fee do you think or just the usual nominal £75 for an adjustment fee?

_Andy_

There may well be an admin fee but there won't be early repayment charges, if that's what you mean.

pritsim

also check with your bank if they will let you switch to interest only from capital?in the current market they might not allow that....good luck with the baby anyway

Squish_21

I'd go for the longer term option to reduce your payments if possible.

17Dave

You don't say how much you owe?
Just a quick guide to the numbers:
Assume £100,000 and 5%
19 years = £680.28 per month - interest total £55,104
25 years = £584.59 per month - interest total £75,377
So 6 years equals £95.69 cheaper per month but at a cost of over £20,000 extra interest.
Hope this helps.
Best wishes with the new baby.

mentat72

17Dave wrote: »

You don't say how much you owe?
Just a quick guide to the numbers:
Assume £100,000 and 5%
19 years = £680.28 per month - interest total £55,104
25 years = £584.59 per month - interest total £75,377
So 6 years equals £95.69 cheaper per month but at a cost of over £20,000 extra interest.
Hope this helps.
Best wishes with the new baby.

Our current mortgage payment is £1252 a month with a mortgage owing of £166k I believe.

Gorgeous_George

The additional cost consideration is, IMHO, a bit misleading.

Saving £95 per month at today's value is not directly comparable to the increased cost (of £20,274) which would be paid over the last three years 2032-2034.

I'd increase it to the maximum period (interest only probably not allowed) and set up ISAs etc., to fund potential overpayments.

GG

mentat72

Thanks everyone for your answers and guidance. Have just called the Abbey and they are increasing the term to 30 years, which reduces the monthly payment by £270, all at no charge. And we can change it again at no charge in the future if required.