questions on interest only mortgages

CLAPTON

I really think you need to find out some more details

a. do they or do they not require you to have method of funding the capital if you go for an interest only mortgage ?
b. if so then how much would that be ... it may be more than you are currently paying so it would be no use.

c. what exactly does it mean 'short term change in interest rate..... ' ; this seems all a bit vague... how long is short ; what change in rate; how much would this reduce the payments each month?

d. are any of these offers in writing?

e. when you say your circumstances may change, how much less a month will this mean?
f. does it make paying the existing mortgage payments impossible or just difficult?

getmore4less

bundance wrote: »

I can't say for sure because of circumstances, but it could be quite a while I may have these difficulties.

No, they offered me three options, should the worst come to the worst
they were
1) a short term change in interest to temporarily help (max 12mths)
2) Extending the term, bu tthe repayents would still be too expensive
3) An interest ony mortgage

1. non starter unless you are sure this is a temp <12m income issue
2. ok won't work.
3. Is this going to make the payments low enough.

With 3. if they insist on some other payment vehicle then you are back where you started since repayment is the the lowest risk option.

If you can manage Interest only then this defers the payment of the capital how long can this be done before time runs out(age will be the issue)?
A combination of 2 and 3 may work as long as income increases at some point to tackle the capiital.

Any other capital due in the future? maybe pension lump sum.

What will actualy work will depend on the details and what Nationwide will really let you do.

uzubairu

uzubairu wrote: »

I have a Nationwide mortgage and on the form you fill out to request a change to your mortgage, there is a section (if you choose interest only) you have to fill in to provide:-
Details of your investment plans or assets that will be used to repay your 'interest only' mortgage.

There are about 12 options to choose from including ISAs, Investments and the Sale of another property.
You then have to give additional details if you select certain options.

You must give details of how you plan to repay.

I am in the process of requesting a further reduction in the term of my mortgage and I have the form in front of me SF211 (Jun 2008) Page 2 of 2.

If it's Cash or investments, you have to give details and the Projected maturity value and if it the sale of a property, you have to provide the Name(s) of the owners, the Address and the Current estimated value.

Why not look at extending the term as much as you can but stay on repayment. You can always shorten it when things hopefully improve.
Interest only can be such a minefield, that you may be storing up trouble for the future if you take this route.

Gorgeous_George

How will you repay the capital at the end of the mortgage?

Have you considered remortgaging at the end of the Nationwide mortgage? This may be sufficient to satisfy them. Alternatively, at the end of the mortgage you could...
sell up and rent
anticipate an inheritance

Is a lodger a possibility?

GG

bundance

dimbo61 wrote: »

You are worried about future money worries!
Can you afford to overpay now?
Nationwide allow over payment of upto £499 a month on most of there mortgages ( please check with Nationwide)
If you can afford to why not overpay now and reduce the mortgage balance each month.
£499 X 12 = £5988 each year plus the interest saved at 5.18%
You could be mortgage free by 2016 at the end of you fix !

Thanks, will ask about overpayments.
Are you saying if I overpay until 2016 I could be mortgage free.
I might be able to over pay now (not sure if I could go upto £499) but my financial future is uncertain. I am on sickness benefits and was medically retired, and there is so much ucnertainty about benefits which is the reason I am financially insecure and uncertain.

Pay off the capital if you can otherwise you could suffer in the future when interest rates rise

I don't know if i could afford to pay off the 40.000 at this stage or in the future, I would if I could.

I really think you need to find out some more details

a. do they or do they not require you to have method of funding the capital if you go for an interest only mortgage ?
b. if so then how much would that be ... it may be more than you are currently paying so it would be no use.

c. what exactly does it mean 'short term change in interest rate..... ' ; this seems all a bit vague... how long is short ; what change in rate; how much would this reduce the payments each month?

d. are any of these offers in writing?

e. when you say your circumstances may change, how much less a month will this mean?
f. does it make paying the existing mortgage payments impossible or just difficult?

a. The poster above is a nationwide customer and they said that nationwide require you to have a method of funding the capital if I go for interest only.
b. It could be true that the investment plus interest may be more than I am paying now and may not be of any use.
c. I assume, if I understood them correctly, they would let me pay a reduced rate for a short while. (12mths max) I dont know the details, the triage team at the nationwide said, on the phone, that I would need to visit my branch.
d. None of these offers are in writitng.
e. At the worst case scanario, if the DWP kick me off sickness benefits (even more stricter rules have just been approved by the Secretary for Work and Pensions) I would be put on JSA, and as I receive £400.00 a month in pension, this would be my sole monthly income, my current monthly repayment is £311 a month.
f. This would make it impossible for me to meet the mortage, bills and food out of just £400.00 a month.

1. non starter unless you are sure this is a temp <12m income issue
2. ok won't work.
3. Is this going to make the payments low enough.

With 3. if they insist on some other payment vehicle then you are back where you started since repayment is the the lowest risk option.

If you can manage Interest only then this defers the payment of the capital how long can this be done before time runs out(age will be the issue)?
A combination of 2 and 3 may work as long as income increases at some point to tackle the capiital.

Any other capital due in the future? maybe pension lump sum.

What will actualy work will depend on the details and what Nationwide will really let you do

Problem may be longer than 10mths. No other capital due in the future unless I get a job, and as I am medically retired, I have been advised I may only be able to get minimum wage jobs.

Other than that, - I dont like to say this as it is morbid, but I will probably have an inheritance from my parents. Dunno how much, dont feel like I could delve into asking how much. I am 43, they are both nearly 69.

Why not look at extending the term as much as you can but stay on repayment. You can always shorten it when things hopefully improve.
Interest only can be such a minefield, that you may be storing up trouble for the future if you take this route.

I looked at the mortgage calculator on google, and did the calculations, it came to £238, which would still be too expensive if I only had my pension of £400 to live on and couldnt get a job. I am a big dubious myself about interest only, and if possible, would prefer to stay on repayment.

How will you repay the capital at the end of the mortgage?

Have you considered remortgaging at the end of the Nationwide mortgage? This may be sufficient to satisfy them. Alternatively, at the end of the mortgage you could...
sell up and rent
anticipate an inheritance

Is a lodger a possibility?

GG

My mortgage ends in 2025. They will allow me to morgage up to age 70 (27years from now) Dunno if they will allow me to remorgage at the end of the term to pay the capital on interest only.
I thought of selling up and renting, but I dont know if the housing benefit I would get would cover the rent, as the housing benefit would be reduced, due to my pension income.
I also thought of a lodger, but after reading the lodger thread on here, am a bit nervous in case I get a disrespectful one who ends up costing me more.

Overpayment sounds like the best plan to rid myself of a mortgage, but whether or not I have the money to is a different matter.

thanks for all of your helpful replies.

bundance

dimbo61 wrote: »

You are worried about future money worries!
Can you afford to overpay now?
Nationwide allow over payment of upto £499 a month on most of there mortgages ( please check with Nationwide)
If you can afford to why not overpay now and reduce the mortgage balance each month.
£499 X 12 = £5988 each year plus the interest saved at 5.18%
You could be mortgage free by 2016 at the end of you fix !

so, are you saying that if I pay 499 extra a month, I could be mortgage free by 2016?

getmore4less

£40k 5.18% 6 years is £648pm.

dimbo61

If you have a £40,000 mortgage over 15 years at 5.18% you must be paying about £320 a month give or take a £1 or £2 now reducing the term to 6 years finishing the mortgage at the end of you fix would mean the mortgage payment would increase to £648 ( about this amount ) each month.
So you dont have to pay your normal mortgage payment ( £320)plus £499 a month.
You need to pay £320 plus £328 ( each month )to be mortgage free by 2016!
Easy for me to say but much harder if you are on a very limited income
GOOD LUCK