Changing from Repayment to Interest only??

Bikerchicken

Hi, our current fixed repayment mortgage is up in July, is it possible in the current climate to go onto an interest only mortgage. When should I phone them? We want to stay with the same lender to save filling out forms etc..... we want to give ourselves a 2yr breather...and then go back onto repayment. We have 10yrs left, so when we went back on we'd stick to 8yrs as to not extend the mortgage.......Hope this makes sense, any advice really appreciated.:) Is it as easy as it sounds?

dunstonh

is it possible in the current climate to go onto an interest only mortgage.

Possible? yes. Likely? depends on the lender.

The FSA told lenders not to use interest only to keep payments down and that they should ensure a repayment method is in place. Some lenders have taken this to an extreme. Others have removed interest only as an option, others dont seem to have done anything.

Bikerchicken

Thanks, with Natwest if that helps.... I see on their website they have Interest only figures so I'm hoping that means they are still doing them.

dunstonh

or it could be to cover all those that have already got interest only mortgages with endowments, ISAs or buy to lets. - i don't know but Natwest will tell you

Raggs_2

I realise that there could be any number of reasons to want a 2 year break, and also that I'm no expert by a long way. But... (and therefore feel free to ignore this completely), it would strike me that whilst interest rates are low, it's time to make hay and pay back as much as possible, since more of your cash goes towards bringing the total down. Then, in a few years when the interest rates rise, then might be the time to ride out the high interest rates on interest only (with a small capital, the IO will be smaller).

Bikerchicken

Raggs couldn't agree more and with hinesight we would ..... but what we would like to do is pay debt off with what we save on the mortgage and then in the two years be debt free apart from the mortgage, which is another reason to stay with the current lenders,

opinions4u

Your plan is effectively to borrow on the mortgage to repay other debts (going on to interest only is "borrowing" the capital repayments that you would have made and using them for something else).

I doubt Nat West would allow you to do this by letting you move to interest only.

There may be other options though:

1) A payment holiday - typically up to 6 months mortgage payments - may free up more money in a shorter period of time to repay the other debt sooner rather than later (EDIT: Make sure the lender treats this in a way that doesn't report negatively on your credit file).

2) A loan from your mortgage lender (ideally at mortgage rate) to consolidate the other debt.

Personally I think you should take a look at the Debt-free Wannabe part of the forum. It may be that you can find other way of reducing expenditure and increasing debt repayment without losing the discipline of fully meeting your mortgage commitment.

Good luck.

Bikerchicken

Thanks for the advice, its certainly making us re-think things.... it does make more sense to borrow alongside the mortgage, I suppose it all depends what the bank says..fingers crossed.... Thanks again

Cannon_Fodder

Be wary of payment holidays. Threads appearing quite commonly, about how it wasn't explained that a 'holiday' was in fact 'authorised arrears' and damaged their credit rating...

Bikerchicken

I would just like to say a big thankyou for the advice given, we decided to go for advanced borrowing and pay off credit cards...it has made it more affordable and doesn't exceed the length of the mortgage, it has now all been finalised and paid.... I appreciate all the comments, it made it more real and made us properly assess our situation... thanks again... and I shall be staying on this site for all the other money saving tips...its a fantastic site......