Interest only mortgage

willows18

We switched to an interest only mortgage a few months ago. Our mortgage lender agreed to it for 6 months and then it would be under review. Our situtation is unlikely to change for the better for sometime so we will be stuck on interest only for a while yet (probably until I can go back to full time work when my youngest starts secondary school in 4 years).

My question is can our Mortgage lender just decide at anytime that we need to start paying back the capital again and take us off interest only?

_Andy_

Contact your lender and they will let you know.

Euphoria1z

good question, one that i should be asking also as im on interest only and thats how it was taken out, currently sitting on my lenders svr. i would also like to know what the likelihood is for a lender changing it to repayments. the OP had it on repayments and changed to interest only whereas mines was interest only to begin with. awaiting more replies...

_Andy_

Your lender will be fine changing to repayment (may be an admin fee) - it's only the other way round that's an issue as it represents higher risk to the lender.

JA1000

Why not try to make some overpayment even if it is small at least they can see you are doing something whilst your circumstances have changed.

willows18

We can't make any overpayment as we are on our absolute limit at the moment anyway. Our mortgage has just gone up 350.00 per month even on interest only. Our current lender had a pledge that their svr wouldn't go more than 2% above the base rate unless there were exceptional circumstances. They have envoked those exceptional circumstances due to the recession and put our mortgage up 1.5% from 1st March. So we are well and truly stuck, if they insist on taking us off interest only we will have to sell the house.

_Andy_

Realistically then perhaps you would be better off selling?

beecher2

If you can't cope with an SVR of around 5%, what will you do when it goes up? It is unlikely to stay so low for the next 4 years. Selling up might be your only realistic option if things are so bad.

surreybased

Hi,

Not sure about the specific of the IO mortgage but I think it's sensible to start having a plan for the future with lower income. IR are at the lowest historically, inflation is likely to rise so all of our household bills will be going up. Since you can see the challenge ahead it's worth considering what are the options.
What will happen if you have to switch back to repayment - how likely is the that (check with Bank). Can you lower current bills?(debt free wannabe site wll be a help). Can you increase current income?
What is the house valued at? Can you trade down?
Just a few things to think through - always best to have some thoughts incase your mortgage payments do go up.

Dan_1976

Take action now.

The lender does not have to take IO for ever, but if you can pay it they may leave it a bit longer. One day you will have to to face up to it though.

If you cant afford the mortgage at rates like that then you best sell while you can.