Mortgage/Interest only advice please.

iain2805

Hello all. This is my first post so please be gentle with me if I ask any obvious questions. We are in need of some advice but I am a little unsure about going to a financial advisor. My problem is this. I live in a 2 bedroom semi-detached house, with my wife and two children. My kids are 3 and 6 and are boy and girl, so I need to extend the house to make another bedroom. My property is worth around 130k and I owe approx 86k on it. I worked out that I could get the extension done for around, and no more than 20k. We got into a little trouble with other debts a couple of years ago but managed to stay afloat without any adverse credit. The thing is if I do remortgage with the extra 20k then I fear it will be too much for us to cope with, especially if and when the interest rates go back up. Moving is not an option for us as the kids are in a good local school and we love it where we live anyway. I have been looking at interest only mortgages but am not fully up to speed with how they work. I am aware that one needs to have a plan in place in order to pay the balance when the interest only period ends. So I suppose what I want to know is this, could I use an interest only mortgage for a few years after releasing the 20k I need and then change back to a normal mortgage like a tracker or fixed for example? This would give us some time to get other debts paid off and get a little straighter before jumping back to another mortgage with the 20k on top of it. I think we could manage then. I am sure I will be advised that it is not ideal or the way it should be done, but we are desperate to be honest, and I can’t think of any other solution for us. Any help or advice would be greatly appreciated. Thank you.

vicshippers

I'm afraid it is unlikely that the bank would approve an interest only mortgage unless you could afford to pay both the monthly mortgage amount and the necessary insurance policy (or whichever funding option you choose). It is even more unlikely if you have increased you personal debt in the last few years, as you say you have.

I wish I could think of another option for you guys...you sound as if you are fully investigating all your options and it's nice to hear someone actually preparing for the interest rate increase. Hopefully you find the answer soon.

Thrugelmir

Try and tackle your other existing debts first.

Defering capital repayments by switching to an interest only mortgage and increasing debt further is a recipe for disaster.

Wutang_2

KevinQuinnMortgageAdviser wrote: »

Hi

Further to your questions, needless to say, raising the £20k will depend upon your current financial circumstances, whether or not a lender will likely lend you this much in addition, or whether if you are approved, you would be expected to consolidate your outstanding unsecured debt as part of the agreement. Most lenders will prefer that you specify to them how you intend to repay an interest only mortgage and will ask for details but in most cases, not proof. It is my advice to anyone in your situation to review your current mortgage and if raising further funds is possible, rather than taking the mortgage on an interest only basis, consider the option of full repayment but on a maximum term. This enables you to continue to reduce your liability and keep the cost as low as possible. You can always review the term at a later date anyway. I hope this helps. Feel free to message at anytime for further advice!

business not going well?

you also sound like a private investigator

Wutang_2

or the medicine woman

Thrugelmir

Spam the thread.

Anastasia

Your children are still young. Is there a possibility of making one bedroom into two which would be cheaper? My sister has just done this with a fairly small house in the same situation as you.

It is unlikely that the mortgage company will allow you to switch to interest only. I did this three years ago with a low mortgage but looking at the posts on here since then the answer seems to be no. They are much more cautious.

I would plan over the next couple of years to reduce debts and spending so that you can afford the improvements on the house.

Good luck. Ana