switching to interest only mortgage

Tuscan

was wondering whats involved in this, we have a repayment loan with Nationwide and have around 77k outstanding on a 180k+ home. we are planing on selling up and moving out of town to a rural village and down grading to clear debts.

im thinking it maybe an idea to go interest only for a 1yr or 2 why the rates are so low and pay off some of our other debts with high interest.

will it be like applying for a remortgage or is it just a case of switching deals?
we have a 100 percent payment record with them over the last 9yrs.


thanks all

Tuscan

ok found out, you need £150,000 equity to be able to do it, we have about 100k so cant do it...

kinglewis

Most banks will usually want to know how you plan to repay the capital at the end? It is not usually satisfactory to say you will switch back to repayment after a few years because they have no way of forcing you to do this.

They usually want you to have a regular ISA set up or some type of savings plan. Then if you then cancel it they are not at fault.

Another issue is sometimes loan to value but you shouldn't have a problem with this looking at the figures you have given.

It is wise to remain on repayment unless you are struggling.. with the lower rates could you not overpay your debts anyway?

Another way is to extend the term of your mortgage.. that way you are still paying some of it off.. and if in future you can afford more you can overpay which will reduce the term back down anyway?????

Ultimately you will need to call Nationwide and ask them it is upto them to allow you to do it and it is not always a 'given'.

Tuscan

yes i just rang them and was told no due to not enough equity, may look into extending the term but we will be selling up in the next few years anyway and will be renting for a while i think, as have to clear some bad debts and rebuild our credit rating...