Mortgage deal due to end...confused

CMW82

Hi

Me and my fiancee originally had an interest only mortgage with Northern Rock, it was fixed at 5.89% for 5 years and we pay £480 and due to end in May 2011.

The outstanding balance to date is £94577 but the house value at present is probably between 80000-85000.

NRAM will convert our mortgage to repayment of we want at their standard variable rate of 4.79% which will be £602 per month or £397 on intrest only.

The problem is we are struggling for extra money as it is due to having 2 loans ( 1 ends Nov 2012 and the otheyr July 2014). If we have to stay with NRAM we would prob stay on interest only until Novemeber when the loan is payed of and then switch to repayment. We sould prob keep the payments at £480 by over paying through standing order whilst on intrest only, if we can.

I have looked at otehr mortage providers but they seem to require a deposit which we don't have...is this right or is this for forst time buyers? This is out first mortgae and have never had to switch before.

Can anyone advise?

herbiesjp

You need to have equity in your property (which acts like the deposit) in order to move to a new lender.

Unfortunately you cannot move without reducing your mortgage balance.

Was yours a 100% mortgage? Is part of that £94k mortgage an unsecured loan?

CMW82

Hi

Yes it was a 100% mortgage and there was a 10,000 unsecured loan as part of the mortages, teh balance on that is 8,700. It looks like we ill have to stay with NRAM.

CMW82

Would you advise to stay on intrest only until Nov and pay extra to repay the unsecured loan, then convert to repayment in Nov?

karlena

I have £20,000 left to pay interest only. One endowment will pay out in 2014. It won't cover the full capital but I have an mini cash ISA. Between these 2 I will be in a position to pay off the mortgage in 2014 only just but may save a little before then.
When I looked at changing to a Capital repayment, I was going to have to pay £350 for 5 years or it may have been longer. Also I have to borrow £25,000 in most cases.
I pay interest only at the moment with no ties £70 per Month.
Interest rates are due to go up. What do I do. I can't afford £300 a month. I manage fine at the moment, who wouldn't?
Do I just stick to interest only but then may find it harder later on to get a deal?
Would appreciate an help as I have a reduced income and have had to manage on very little. I am a novice at this. I even tried getting £15,000 loan but that was also 5 years of much higher payments. Please help!!!!!

reviewbyme

Hi CMW82

You say your lender will convert your mortgage to repayment when your fixed rate expires, but I assume only if you request them to. No doubt there would be a charge for them to do this.

Why the urgency to switch to repayment? You know how much the monthly payment would be if you were on repayment. Why not stay on interest only while you are struggling and pay over and above the interest only monthly repayment when you can.

You would therefore be paying off some capital and in the event you have a bad month you could just pay the contractual payment. By doing this you would avoid going into arrears. Each time there was a rate change or every so often, you could contact your lender to give you a quote over the phone as to what your repayments would be if you were on repayment to make sure you are on track.

No doubt it is easier for you to change to repayment than to get your lender to revert back to interest only (when again no doubt you would be charged for the service)

When you are back on your feet you could look to change to repayment.

You mention there is an unsecured loan attached. Why not make the additional overpayments separate to your contractual payment and/or stipulate the overpayments are to go to the mortgage only, thereby improving your loan to value, to help get you out of the negative equity situation. The unsecured loan will probably already be on repayment.

karlena

Thank you so much for you help. I am no longer on the fixed rate so I can do as I wish. At the moment I pay just £70 interest a month. As you mentioned I won't do anything just yet but should the interest rates go up, I could add to paying up part of the capital. That so makes sense:j
So pleased with that and thank you again