Fixed rate or not ??

calitriuk

Hi just after a little advice really I am on an abbey flexi mortage, for the last 12 months it has been on interst only and is now down to £100 a month but I am not paying my mortage off which is what I want to do.

I owe £105,000 and have 21 years left on it. I am wondering if it is best to go on a fixed rate so I can get it paid off and I know the rates are going to go back up at some point,

any ideas

Scaredy_Cat_3

I assume you will be switching to repayment then? The only way you will reduce your mortgage balance while it remains interest only is by making overpayments.

If it has 21 years left on it, do you have some kind of product in place that matures in 21 years to clear the balance?

dimbo61

If you took out a 5 year fixed rate repayment mortgage at 3.99% for £105000 it would cost you £616 a month.
You need to have over 40% equity and the fees are £999 plus costs.

calitriuk

yes I want to get it back on repayment and do overpayments when I can to get it reduced, I do not have a product that matures after 21 years I don't really know what you mean with that. and my house now after all the climate is probably only worth £110 if im lucky so thats areound 90% I think

beecher

95% LTV with those figures.

Have you phoned up Abbey to see what they can offer you? Is it possible for you to stay on the same deal and shift to repayment?

calitriuk

I have tryed ringing the abbey they are really busy holding for over 20mins is a real pain but i will speak to them aswell, I can stay on the flexi and move it to repayment but I just do not want the rate to start rising and I end up paying a lot.
and yes the ltv has gone bad after the current climate thats why its looking like im sitting tight

beecher

I can understand that as if your LTV gets any higher, Abbey won't give you a deal at all. I'm not 100% sure they'll give you a very good deal with your LTV as it is. If you can't get through by phone maybe you could go into a branch?

Scaredy_Cat_3

calitriuk wrote: »

yes I want to get it back on repayment and do overpayments when I can to get it reduced, I do not have a product that matures after 21 years I don't really know what you mean with that. and my house now after all the climate is probably only worth £110 if im lucky so thats areound 90% I think

OK, I'm a little out of date but I used to work in Abbey's mortgage centre so I do have some idea what I'm talking about

If you have a straight repayment mortgage, then you pay some interest and some capital every month and at the end of the term the entire mortgage is paid off.

If you have an interest only mortgage, then you only pay the interest each month, and nothing at all goes towards clearing the mortgage balance. The *idea* is that you have some kind of financial product running alongside your mortgage, like an endowment policy (in the old days) which will mature in 25 years or so and you use the funds from that to clear your mortgage.

In the last 10 years or so a lot of people took out interest only mortgages but didn't bother with the financial product (ie endowment policy), and worked on the basis that they would pay the interest only each month, and clear the balance when they sold the property - taking any profit to use on their next purchase.

It's a bit confusing for Abbey to say you have an interest only mortgage over 21 years. The amount you pay each month is exactly the same whether your mortgage is 1 year or 21 years as you are only paying the interest. That 21 year term is only there because that's the point at which they expect you to pay up and clear the balance.

From the way you worded your post, saying you have been on interest only for a year, I wonder if you were originally on repayment and switched to interest only as a short term measure to reduce the payments for a bit? Either way, you will need to switch to repayment in order to start reducing your balance. I think Abbey charge a fee for switching (if I remember correctly) which is why some people simply choose to pay extra each month. Any extra you pay will automatically reduce your mortgage balance.

Sorry for rambling. Hope that explains my original post, though.

Scaredy_Cat_3

calitriuk wrote: »

I have tryed ringing the abbey they are really busy holding for over 20mins is a real pain but i will speak to them aswell, I can stay on the flexi and move it to repayment but I just do not want the rate to start rising and I end up paying a lot.
and yes the ltv has gone bad after the current climate thats why its looking like im sitting tight

It's easier to get through in the evenings - or if there's a good football match on, or a really interesting episode of Coronation Street

calitriuk

cheers mate, yes I was on repayment origanally and moved to interest only when changing jobs etc, but I want to get it payed off asap im only 31 and do not really have any retirment plans setup so im kind of looking to the future I was just wondering should I stay on the flexi mortage and go back onto repayment or find a fixed rate and they charge £75 to change the cheeky gets!!!