Changing mortgage from repayment to interest only

lfckerry

Hi

wondered if anybody could give me some advice. me and my other half are splitting up. we have a mortgage which is joint. we had the house valued to sell but its just not worth enough and a loss would be made.
we are considering renting out the house for a couple of years to see if the market picks up. at the moment the rent would not cover the mortgage. we were thinking of changing to interest only. we have an appointment at alliance and leicester who provide our mortgage,this afternoon. do you think they would be happy for us to do this? what sort of questions are they likely to ask?

any help appreciated

thanks

Orpheo

I think that they will not be prepared for you to move to IO without a repayment vehicle. Quite right too.

clutton_2

if the rent does not cover the mortgage they will almost certainly say no.....

even if they say yes...

how will you cope if the tenant stops paying the rent ?

lfckerry

What sort of repayment vehicle would i need? sorry if i sound dumb but not done this before and just want to get an idea of the questions they would likely ask.
Do you think there are any alternatives?
thanks

Orpheo

These are questions that you should be taking up with A&L. Trying to pre-empt your meeting here will probably only serve to worry you. Think about what you want to get out of your meeting this afternoon and relax. The A&L will want to help you, they have stake in this too.

Loopgames

Just give them a call and ask if you can change to interest only due to financial circumstance.

We did and they obliged quite simply.

lfckerry

I am stressing about it,will just have to wait and see what they say.

i tried doing this over the phone but they said we had to go in to a branch to discuss

if all else fails i guess we will just have to try and sell and take the loss!

thanks for the advice

Orpheo

The level of equity in the property is likely to influence how "obliging" they will be. That is unless you ask to be put through to their "obliging" department where their good fairies are obligated to make every decision based on the key objective to be "obliging" regardless of your financial circumstances.

lfckerry

i like the sound of the obliging faires! lol

i think there is a bit of equity in the house but that of course depends on A&L's valuation.

twirlypinky

Please don't do this, it's not a quick fix measure. My boyfriend has an interest only mortgage that he got before we were together, because he couldn't afford repayment. The bank should never have allowed him to do this, three years on he's in negative equity by £10k and stuck. We went to the bank to ask if we could change the mortgage to a repayment one (since we're now out of the fixed rate) and they basically said no. We've no deposit in the house now and there is nothing we can do apart from overpay the mortgage now to get out.

After the events of recent years i really don't think it's worth hanging on to property to gain something in it's increasing value - because you've got no guarantee that this will happen.

Jackinbox99

I recently spoke to the nationwide about moving my mortgage onto interest only. The mortgage is for around 1/4 of the house value, so I have a 25% LTV ratio, and will be cleared in 2 years as a repayment mortgage. They said "yep, no problem we can put you on interest only".

Only after going through all the forms and application they they refused me. They have 2 criteria. Firstly, you have to have at least a 66% LTV. Which ive got much better than that at 25%. And secondly, you have to have £150k equity in your property. Now, thats where the stumbling block is. Its apparently some old policy of Nationwides. If I was unable to pay my mortgage and sold my house, id get enough money to pay my mortgage off 4 times over, and yet because the equity isnt 150k or more then they cant put me on interest only. Even the mortgage advisor at the bank didnt understand the logic behind that policy.

Lets hope Allience & Leicester are better!