Switching from interest only to repayment

asandwhen

Im in the same boat at the moment - I want to change from IO to repayment on my chelsea mortgage - They want £75 to do this - I also want to borrow over a longer period of time and they want another £150. I am thinking of just overpaying on IO ( by the ammount i would be paying on repayment) until my deal is up then do it with a new lender.

Does this make sense?

catriona69

asandwhen wrote: »

Im in the same boat at the moment - I want to change from IO to repayment on my chelsea mortgage - They want £75 to do this - I also want to borrow over a longer period of time and they want another £150. I am thinking of just overpaying on IO ( by the ammount i would be paying on repayment) until my deal is up then do it with a new lender.

Does this make sense?

Absolutely. That's what we're going to do. Except when your deal ends you may be better off going on the SVR and repaying whatever you want as there won't be a limit to the amount you can overpay.

Depending on your LTV, you may be better off on the SVR than a new deal.

justthehousekeeper

Hi, we're with the Woolwich, and changed from part & part to full repayment about 6 months ago. They waived the £50 admin fee as we were able to demonstrate that the projected value of our endowment was due to fall short of the target sum. Could be worth a try with the A&L.

AirCooledHeaven

catriona69 wrote: »

Does anyone know whether it is possible to switch from an interest only to a repayment mortgage during the initial fixed rate term? (preferably without paying a penalty).

The mortgage is with Alliance & Leicester if this makes any difference.

I can't speak for the A&L but we changed ours during the fixed rate period and we weren't penalised although they did charge a £50 admin fee. Check the repayments first though, going from interest only to repayment will make a big (upward) difference to your monthly payment. You'll probably find they will also let you split it part interest only and part repayment. Obviously anything that reduces the interest only portion is a benefit to both you and the lender.

Robert_Sterling_3

catriona69 wrote: »

Another question has sprung to mind as well... a fairly common condition with A&L mortgages is that you can make a penalty-free overpayment of £499 each month.

Has anyone asked whether this can be increased? If not, I might also them that when I call as it seems silly to have to hoard money in savings accounts that are paying measly interest when it could be bringing the mortgage down.

If they say you can overpay £499 then that is rather like saying that that is the limit above which you cant go.

Your equity appears to go up but if it is like the Nationwide overpayment scheme where you can have the overpayment back at a later date then your equity has not gone up but could go back down later.

catriona69

AirCooledHeaven wrote: »

I can't speak for the A&L but we changed ours during the fixed rate period and we weren't penalised although they did charge a £50 admin fee. Check the repayments first though, going from interest only to repayment will make a big (upward) difference to your monthly payment. You'll probably find they will also let you split it part interest only and part repayment. Obviously anything that reduces the interest only portion is a benefit to both you and the lender.

You're exactly right - A&L just charge a £50 admin charge to make the change. However, as our deal ends at the end on June it's not worth us paying this charge to change. Instead, we're just going to make the £499 monthly overpayments that A&L allow and then pay a larger chunk off in July when there are no penalties for overpaying larger amounts.

For us our monthly mortgage payments are so low compared to our income that we could easily afford to switch to repayment and still overpay £499 each month. That's why I was trying to think of penalty-free ways of reducing our mortgage.