Should I switch a repayment Mortgage to interest only?

clanny

Hi can anyone help please?


I have a £210,000 mortgage with Northern Rock fixed at 4.99% until October 2010. We have about £15,000 debt on credit cards that we are struggling to clear. I contacted Northern Rock to discuss remortgaging for the additional amount but they will not do anything as we still have a year left on our current deal.

They did suggest switching our mortgage to interest only for the rest of the term, This would reduce our repayments to £869.00 and give us a chance to clear a big chunk of credit card debt.

Is this a good idea?

Thanks in advance for any replies.

_Andy_

When you say 'for the rest of the term' - how would you then be intending to pay off the mortgage at the end?

clanny

We would be looking for a new deal, hopefully fixed rate and switching back to repayment again.

dunstonh

I contacted Northern Rock to discuss remortgaging for the additional amount but they will not do anything as we still have a year left on our current deal.

The status of your current deal has no impact on your ability to borrow more money.

They did suggest switching our mortgage to interest only for the rest of the term, This would reduce our repayments to £869.00 and give us a chance to clear a big chunk of credit card debt.

Is this a good idea?

For a very short term possibly. However, the problem with that is when you move back to repayment mortgage, your monthly payments will be higher due to the shortened term remaining. Lots of people have gone interest only for a temporary period only to stay on it because they always find an excuse not to switch back. In the end they run out of time and money and have to sell up and move down the ladder or go into rented.

Cannon_Fodder

Until you have discovered and tackled the reasons for building up the debt, you will merely be postponing the problem by going IO.

And as Dunston says, once on it, you have nowhere left to go...

Try having a look at the debt-free and mortgage-free wannabee boards, for ideas on curtailing your expenditure or increasing your income.

The £15k was spent on something, can some of it be sold on ebay for example...?

Find £1k from your accumulated belongings and that will dent the capital enough to reduce interest to free up some further cash towards the capital instead, and starts a snowball effect.

Plenty of other ideas, suggest you take a look.