Bank of Scotland Mortgage Advice needed...

parkmun

Hi there
We have our mortgage with BOS on a standard variable rate (which we shouldn't be on but that's an issue for another thread!) and we are worried about the potential interest rate rises coming our way.
We pay 4.84% at present, and although we saw maybe one or two of the interest rate cuts over the last couple of years, they stopped at 4.84%.
We are planning on going back onto a replayment basis and cutting down the term of our mortgage. On 4.84% we could cut the 20 years we have left to 10 years but not if the rates go up (or at least we assume we can't).

What we need to know is, once the interest rates start coming back up, will we see the increase from Day one?

Also, who would be be best to seek advice from on this - please don't say CAB! Would a mortgage advisor be able to help?

We can't change our mortgage, as we have both been made bankrupt in the last few years. Although we have bought our interest back so that house is safe (as long as we keep up the replayments) we are worried we may lose our last asset.

If we're going to be in a position where we can't afford the mortgage then I'd rather walk away now.....rent and work fewer hours to spend time with my family etc.

Any advice would be much appreciated.

Thrugelmir

You've obviously struggled to get a foot on the property ladder. So don't throw your hard work away. I would suggest paying a visit to the DFW board.

As you've suggested started making capital repayments off the mortgage. Being on interest only is little better than renting.

Rather than worry about interest rates rising. Try taking the view that the less you owe the less interest you'll pay. A mortgage is a lifetime committment. The benefit being that in later life you'll own your own. No still paying rent.

ViolaLass

parkmun wrote: »

We are planning on going back onto a replayment basis and cutting down the term of our mortgage. On 4.84% we could cut the 20 years we have left to 10 years but not if the rates go up (or at least we assume we can't).

What do you mean, you assume you can't? Have you done any calculations? Ask the bank whether you're allowed to make overpayments (since you're on the SVR, the answer may well be yes) and whether there are any limits. If there aren't, then it would be better to not change the 20 years to 10 but to overpay each month, giving you the flexibility to not overpay if you have a tight month.

parkmun wrote: »

What we need to know is, once the interest rates start coming back up, will we see the increase from Day one?

Probably yes but it's up to the bank.

parkmun wrote: »

Also, who would be be best to seek advice from on this?

Advice on what exactly? Whether you can afford it?

parkmun wrote: »

Although we have bought our interest back so that house is safe

What does this mean?

parkmun

In response to your replies, we did not struggle to get on the property ladder, this is our 4th house and we did originally have plenty of equity. However, we raised capital on the house when times were good and now we're in negative equity.

With regards to overpayments, we can do this but get charged for every one. It would cost more overall, though I can see this avoids us being in the position where we couldn't meet the payments on a reduced mortgage term.

The advice we want is to calculate how much we would pay at set points, say 5.84% throught to 9.84%, and also if we decide to bail out, how we can do this.

The 'house is safe' comment, relates to the fact that although we both went bankrupt, we each have bought back our beneficial interest therefore the house is ours and in effect the bankruptcy never happened (except we can't get another mortgage and our credit ratings will be shot).

We realise that interest only is no better then renting, which is why I am loathe to continue as we are.

parkmun

Just wanted to add that we've looked at mortgage calculators to get an idea of what the intervals from 4.84 to 9.84% would be and the figures it is giving bear no relevance to the figures BOS gave us!

According to the calculators, the average we should be paying on our mortgage over 20 years is £1176 however BOS told us to revert to repayment it will be £1300pm. The calculator also said to reduce to 10 years we pay £1900pm but BOS advised us £1700pm which is why to us, paying an extra £400pm seemed so favourable - getting rid of paying 10 extra years in the process!

FYI we pay £760pm at the moment interest only over 20 years.
This came down from £800 - hence why we are so thankful for the BOE interest rate cuts! Not.....