Temporary switch to interest only

huntsman34

Hi,

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Bit of back story for the interested:
I (unfortunately) bought in Oct'07, right at the peak of the market, getting a 5 year fixed rate mortgage with Nationwide at 5.98%.

Given the state of things, I am doubtless going to be in the house longer than I had intended to make my money back.... luckily, the house is of adequate size and I can afford the repayments.

There is little/nothing left over at the end of each month, however, and this house needs some work.

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I looked into taking a payment holiday, but I don't want to get spanked by them adding the missed interest to the end of the loan and then increasing the monthly repayment.

I was wondering if it is possible (and if there are any penalties) to temporarily switching to interest-only for a few months.

Does anyone have any experience with this?


My monthly repayment is £1710... by switching to interest only it would go down to £1322... so if I were to switch for 8months (for instance) I would save almost £3200, which would allow me to do the bathroom (really needs it!) and upgrade the central heating/water.

naijapower

There is no penalty for switching to interest only other than a small admin fee e.g £100.
It is a wise option if you are struggling as it ensures you dont miss or default payment. Also, it is good as your intention is short term i.e. 8 months.

Robert_Sterling_3

IT is not obvious to me that you can switch to interest only particularly if you are in negative equity.

huntsman34

Robert_Sterling wrote: »

IT is not obvious to me that you can switch to interest only particularly if you are in negative equity.

I'm not intending to sell for quite some time, but you are correct in that I am in negative equity.
The total capital of the mortgage is £265455 and the house is (at best estimate based off nearby houses of similar type on sale) £255000.


Does this affect the ability to temporarily switch to interest only?


Many thanks,
James

beecher

You need to phone up Nationwide and ask them if it is possible. Ultimately it is up to them, and they may feel that a new bathroom/central heating isn't a good enough reason for you to go onto interest only, and may not allow you anyway because of the negative equity.

You could go onto the Debt Free Wannabee forum for help on how to cut down on bills in order to save up for the bathroom/central heating. Could you rent out a room to raise some money?

maveli

I am trying to do the same with HSBC and it looks like very difficult. I have 22 years remaining on the mortgage and got an LTV of 60% in current market. I got a call from them asking me what repayment vehicle I can show. I told them I have current ISA worth 30% of outstanding mortgage. They said that's not enough. they are looking for other assets like another property and so on. It is still under review and I am hoping to get an answer by next week

Robert_Sterling_3

huntsman34 wrote: »

I'm not intending to sell for quite some time, but you are correct in that I am in negative equity.
The total capital of the mortgage is £265455 and the house is (at best estimate based off nearby houses of similar type on sale) £255000.
Does this affect the ability to temporarily switch to interest only?

Thank you for providing this further information.
The Credit Crunch is for real.
You are in negative equity.
If you go to an interest only mortgage for a short period it is likely that your negative equity will increase.

My guess is that Nationwide will not allow you to move to interest only.

I may be wrong. Let us know what they say please.