Mortgage break

Cheeze439

I know I should be asking the Mortgage company this but I thought I'd post here first and get an opionion.

We have a mortgage with Northern Rock, approx £134,600 outstanding with 31 years left to go. We pay approx £770 per month at the moment on a fixed deal.

I just rang them to arrange a 6 month mortgage break as my wife is expecting a baby.

They said that they can do this but during that period we still accrue interest so when we start repaying again we will be paying out £830 per month, a £60 rise, for the rest of the loan. I work this out to be a total of £22,020 in payments compared to a break of £4,620.

Does this seem right to anyone else, I'm rubbish with things like this.

Would taking a £5,000 loan out with a bank be a better idea?

I'd appreciate any advice, plus the fixed term ends next year so we could actually end up paying a lot more.

getmore4less

£134k 31 years £770pm is around 5.73%

interest is around £639pm but this compounds for the 6 months so around £3900 gets added to the loan

to pay £137900 over 30y 6month(366 months) is £796pm

so an increase of £26pm.

Cheeze439

Looks like I need to ring them back and challenge this then, thanks.

opinions4u

Cheeze439 wrote: »

We have a mortgage with Northern Rock, approx £134,600 outstanding with 31 years left to go. We pay approx £770 per month at the moment on a fixed deal.

My first thought is that at some point in time you should consider looking at reducing the term and paying more. This may not be now, but 31 years is a hell of a long time to have a debt for.

I just rang them to arrange a 6 month mortgage break as my wife is expecting a baby.

Which is effectively a 31 year personal loan of 6 x £770 = £4,620.

They said that they can do this but during that period we still accrue interest so when we start repaying again we will be paying out £830 per month, a £60 rise, for the rest of the loan. I work this out to be a total of £22,020 in payments compared to a break of £4,620.

Does this seem right to anyone else, I'm rubbish with things like this.

It seems wrong and I agree roughly with the numbers in the first reply.

Would taking a £5,000 loan out with a bank be a better idea?

Unlikely. Personally I think the best way to handle maternity leave is to save lots of money up before hand, rather than borrow your way through childbirth.

I'd appreciate any advice, plus the fixed term ends next year so we could actually end up paying a lot more.

It's good that you are looking ahead towards this sort of situation.

Perhaps spending some time around the Mortgage-Free Wannabe section would be a good idea going forwards.

Cheeze439

I was thinking of ways to lower the term.

My car is fully paid for in 18 months, that's £150 per month. I was originally planning on looking into a new car. In hindsight keeping this car and regularly servicing it I could put the £150 per month saved into the mortgage as an over payment. A couple of mortgage over payment calculators are estimating this as saving about 9 years and £50k. Plus my bonuses which can be around £1500 - £2000 every 3 months, if I plough 70-80% of them into it too I could seriously dent the debt.

getmore4less

Save a bit of the saving for areplacement car

Start planning ahead and save for things so you don't need to get into more debt.