Stuck in Interest Only Mortgage rutt

pink_biker

I am SURE I am not alone in this situation and would appreciate any help from others in the same situation or who have had experience here.

In short, I want to reduce my mortgage payments or keep same payments and reduce the term.

10 years ago I started my mortgage for my current property and at the time I earned £30k pa. 5 years later my husband left and basically took me for a ride financially.

I now have a mortgage of £180,000 as I had to buy him out and I had to go on interest only so I could afford it. I pay £730 per month. The house has an equity of about £40,000. A couple of years ago I became self employed as a driving instructor and my first year's "earnings" showed a £3k loss and this year I made a profit when my earnings were £6k (yippee).

I have never fallen behind with payments (kept selling everything I owned, rented a room and now met a lovely man who helps with the bills). I would like to move to a repayment mortgage even if it means moving house and downsizing, but I can't borrow with my latest earnings track record.

My boyfriend earns £25k a year but has CCJ's (started in 2009) so we can't include his income in a mortgage quote.

Is there a way I can treat his income as mine (rent?) or is there some way I can get a mortgage with my income? You'd think my past history would go in my favour and I have an excellent credit rating (according to experian).

I have considered selling altogether and try to get shared ownership later on but I have read on here about the drawbacks to that.

Any thoughts anyone please?

Burridge60

pink_biker wrote: »

........I now have a mortgage of £180,000 as I had to buy him out and I had to go on interest only so I could afford it. I pay £730 per month. The house has an equity of about £40,000. A couple of years ago I became self employed as a driving instructor and my first year's "earnings" showed a £3k loss and this year I made a profit when my earnings were £6k (yippee).

I think you already have a mortgage why would you want another one? just that the "method" of repaying it (or not) is Interest Only.

You don't have to change lenders to get a Repayment Mortgage in fact I am sure your lender would love you to reduce their risk by paying some of the capital back bit by bit.

I am sure if you pick the phone up and explain what you want to do to your Lender they will be constructive and helpful.

They love borrowers who want to pay back their mortgage.

You could just increase your monthly payment and you would be chipping away at the capital but check this is penalty or charge free. If they collect by direct debit ring them and tell them how much it should be adjusted to.

pink_biker

Thanks for your reply. I've been advised by a friend who's a conveyancy solicitor that if I want to change my mortgage in any way, shape or form I have to reapply and my problem then is I don't have any proof of earnings.

But I will call them and see what they say. My worry is that as soon as they know I only earn £6k pa they'll drop me like a tonne of bricks.

dimbo61

They cant drop you as you own the property and you have been paying the mortgage each month.
You dont have to tell them what you now earn all you need to do is ask can you overpay your interest only mortgage by £XXX each month.
What you have to consider is what you are going to do when the term finishes!
Sell up and rent

pink_biker

Sorry I think I've confused you. I don't mind paying £730 a month if it's on a repayment mortgage, but for interest only I think it's extortionate as it's a lot of money to not actually be clearing off any of the debt (obviously it met a means to an end at the time).

If my mortgage was lower, say on a new property worth £150,000 and I put my £40,000 equity down to make the mortgage £110,000 then I don't mind the same term.

Does that make sense? Thank you so much for your help so far.

getmore4less

I now have a mortgage of £180,000 as I had to buy him out and I had to go on interest only so I could afford it. I pay £730 per month. The house has an equity of about £40,000

You did not have to buy him out, why take on a debt you could not afford, should have sold up then.


I think thats your best option now sell and rent till you get your income sorted.

dimbo61

As you yourself point out you wont get a mortgage with £6K profit as income and your B/F CCJ so enjoy being on IO and if you can overpay a little and build up savings in cash ISA,s
Hope the value of your home increases over the next couple of years and wait for your BF credit score to improve before looking at changing to repayment

pink_biker

Thanks for your time and help. I had a feeling this was my only option but just wanted to check. It seems there are always people getting help in these and I wondered how they do it. Think I'm gonna look for another job which actually earns some proper money. This is the only full time job I've done for £6k per year!!! :beer:

pink_biker

I now have a mortgage of £180,000 as I had to buy him out and I had to go on interest only so I could afford it. I pay £730 per month. The house has an equity of about £40,000

You did not have to buy him out, why take on a debt you could not afford, should have sold up then.

When I took on the debt I could afford it, it's only since being self employed for the last 2 years that I've struggled.

I think thats your best option now sell and rent till you get your income sorted.

Maybe. Think I'll try and get a better paid job. Self employment's great, but pay is rubbish in this field.

MegaMiniMouse

How much would it cost you to rent a place similar to the place you have now?

These days, property ownership is not necessarily the best place to be ...

If you can continue to live where you live now, paying only what you might have to pay in rent for a similar place elsewhere, but without the hassle of having a 'landlord', then why not stay put?

MMM

property.advert

You can always overpay with interest only but I'd advise keeping the cash somewhere outside the property in the short term. It doesn't sound like you have any savings so get 6 to 12 months of bills put aside. Then get some savings (the interest on next to nothing is minimal between what you receive and what you pay on your mortgage). Look to repay lumps of £1000 or more.

However, if you can't afford it now, then you are screwed when interest rates rise unless you are on a fixed. It looks as though you are currently paying about 4.85% and another 2% will cost you another £300 a month, which sounds as though it will sink you.

If you cannot get a substantially better paying job almost immediately, sell up.