Switching from Repayment to Intrest Only - NR

makiz63

We took a 3 year fixed rate mortgage which is due to end 1st of July. We have been paying intrest + repayment fixed rate of 6.49%. Our house is in negative equity. I called Nothern Rock to find out if we can switch to Intrest Only when the deal ends. They told me we can only switch to intrest only for a maximum of 1 year and we have to fill in a form detailing why we want intrest only. At the same time we should have an endowment for them to consider this.

I was under the impression that I could just tell them by a phone call that we would like intrest only when the deal ends.

Please kindly advise as I am a little bit confused.

Many thanks

opinions4u

makiz63 wrote: »

We took a 3 year fixed rate mortgage which is due to end 1st of July. We have been paying intrest + repayment fixed rate of 6.49%. Our house is in negative equity. I called Nothern Rock to find out if we can switch to Intrest Only when the deal ends.

The key question for anybody reading is "why do you want to change to interest only?". An additional question is "how are you planning to repay your loan?".

They told me we can only switch to intrest only for a maximum of 1 year and we have to fill in a form detailing why we want intrest only. At the same time we should have an endowment for them to consider this.

And the lender seems to ask the same questions. Do you have an endowment?

I was under the impression that I could just tell them by a phone call that we would like intrest only when the deal ends.

What gave you that idea?

The good news is that their SVR is lower than the fix that you're on, so your payments should reduce when the fixed rate ends.

From the lender's perspective their security (your home) doesn't cover the loan. Allowing you to go on to interest only would mean the debt isn't reducing. Why would they want to make your negative equity situation worse, meaning that their risk of losing money is higher?

dimbo61

So read the paperwork that came with your mortgage offer and find out what happens to your mortgage when the fixed rate ends?
Does it go onto the SVR or some sort of tracker deal and then find out what you will be paying.
Just give NR a call and ask it maybe that you are paying less each month.