Interest only or Repayment, please help?

healeddoughnut

Hi, my wife and i bought a 2 bed bungalow for £205,500, 3 years ago. We live in Bournemouth. The house needed a major update which is now complete. We recently had the house valued by HBOS, who have put the value at £200,000. Our mortgage has 15 years to go.
I am quite happy with that valuation, considering the downturn over the past couple of years. We are currently paying £860 per month on an interest only mortgage as we did not expect to be here long. However we now have a child, and are looking to stay for at least the next 5 years, and are considering changing to a repayment mortgage.
My questions are as follows and i really would appreciate any help or advice you can give:
1) Is a Banks valuation the same as an estate agents valuation or what i could sell for?
2) If changing to a repayment, what is the best course of action, or would anyone recommend a course of action?
3) What is best, fixed or tracker?

We are not looking to stay here for the next 15 years, maybe 5 at the most before moving on. Halifax have offered me some deals, ranging from, just repayment at approx £1590 per month, to half and half or 60/40 or 70/30, not quite sure how that works.

We would be most grateful for any advice.

Kind regards and thank you in advance.

Steve and Lucy, and baby Gabriel

Thrugelmir

The banks valuation will be the basis on which they will make you a mortgage offer. This willl be different to an Estate Agents which is only a guide as to what a potential buyer may offer.

Until you've paid the capital balance the property will never be yours. So irrespective of where you intend living in the future. You should have a long term plan to discharge the capital.

For many people the discipline of paying a regular monthly amount is often the best option. So consider switching your mortgage to repayment, over a term where you can comfortably afford the repayments.

redpete

Are you happy wioth the interest rate you are paying at the moment? If so then does the lender allow overpayments without penalty? If so then why not make regular or lump-sum overpayments and effectively turn it into a repayment mortgage but one where you have the flexibility of how much you repay.

fixed vs tracker - depends on whether you need or want the security of knowing how much the monthly payments will be, the fees and interest rates of the alternatives, and your judgement about what might happen with interest rates. I've just gone for a tracker because the fixed rates are relatively high at the moment relative to base rates, because I don't think rates will rise by 2% in the near future, and because I can afford quite large rise in the monthly payments.