A question about part repayment part interest mortgages...

miat1974

Firstly a quick Hi as I dont often post here but wondered if someone can help me.. We currently have a repayment mortgage and asked for a payment holiday but was turned down as with the current housing market we dont have enough equity in the house. (Need at least 20% and we are now just under that because of house prices.) ANyway we are looking to reduce our mortgage payments short term as my hours have been reduced considerably at work. The mortgage company have suggested a part repayment part interest mortgage which I kind of understand but not entirely. When applying for this it asks the amount I wish to put on interest only.. If our mortgage is for £149000 how much would you put? Bearing in mind it also asks for projected maturity value of our savings etc but how will i find that out?? THe lady on the phone said they dont check these policies but am aware that we will have to find the money from somewhere should I lie and say our savings and investments are more than they actually are. But this is only a short term situation we want to be in.. can anyone help?? x

Mrs_Bumble

Are they going to charge you to switch to part and part?

Part repayment and part interest only means that part of your mortgage balance will be on repayment and this element of the mortgage the balance will reduce in line with your payments etc, the part on interest only the balance will not decrease and you will pay only the interest on this element, and will have to have some method of repaying this at the end of the term, which is why they are asking you about savings etc. Very, Very bad advice to tell you that they never check! Unbelievable!

Switching to part and part in my opinion is not really a short term measure and I suspect they are going to charge you for the pleasure and then would charge you to switch back.

How much do you have to save per month? Can this be achieved by extending the term of the mortgage? Do your ages allow this? Did they discuss this option with you?

If you know your mortgage balance and interest rate have a look at sites like this and play with the term to see how much of a difference it makes

http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

Extending the term means that if you left it at the longer term you would pay much more but extending the term can also be a short term measure that you can counter balance by making overpayments when you back on your feet, as again the lender is likely to charge you to extend the term and if you asked to change back would charge you again then.

miat1974

thank you for your reply. THey did discuss the option of extending the term but unfortunately this isnt an option for us as the term is already set for 27 years which means my husband will be 60 when the mortgage is finished. (their limit)

Im not sure if they will charge us to change the repayment to part and part as they didnt mention this... I will have to check before I go completing the forms. Its such a shame we couldnt have a payment holiday (Just for 3 months) as it would mean we could get straight.

THanks again for your advice.

Gorgeous_George

I think your solution may lie elsewhere.

Could you increase your income by working some hours elsewhere or by taking a lodger?

Are you tied to your mortgage provider? If not, other lenders will allow a longer term.

Can you cutback elsewhere? It is surprising how much we could all save by slashing unnecessary costs.

Could you take a loan? Not always the best option but a small loan may be easier to repay over 5 years and could prove cheaper than changing mortgage products.

GG