Interest Only Mortgage To Clear Debts

getmore4less

DontWorryBeHappy wrote: »

We both have very good personal pension schemes. Would these be acceptable vehicles for proof of capability to repay?

My intention would be to replace my 2 year IO mortgage with a repayment mortgage over 8 years, 2 years less than the 10 years remaining on my current mortgage, so as to keep my target mortgage completion date the same as it is today. The £500 I currently pay out on credit card payments should more than cover the increased mortgage payments, depending on what the interest rate is at that time.

£200k @ 5% over 8 years £2532 so £400 short on your current £1600+£500

(0% is £2088 so close to your estimate of £2100 so you will be short whatever the interest rate is)

Your thinking seems to be how can we keep our spending as high as possible and delay the debt repayment.

Why not think DEBT FREE ASAP and review the spending again.

stick £220k into this mortgage calculator and set yourself a date to be total debt free at 5% interest and aim for that as the goal per month.
http://www.whatsthecost.com/mortgage.aspx

GMS

You need to be sure if you change mortgage that you do it for a better rate than you have now. Missed payments will affect an application and may mean best rates not available.

If your current mortgage rate is low you may want to look at a second charge loan to repay the unsecured debts. Whilst the rates on these will be pretty high, if the mortgage is low it makes more sense to have the consolidation loan in isolation rather than transfer the full mortgage to a potentially higher rate.

After 12 month you could review the overall package and look to remortgage elsewhere.

Difficult to say without knowing your full circumstances but I have found clients on a low rate are often better off raising relatively low amounts with second charges and leaving mortgage as is.

Speak to a broker and get an idea of what may be available

Thrugelmir

DontWorryBeHappy wrote: »

I do have my spending under control now. Every payment, down to my £2 per week lottery ticket, is logged in to Microsoft Money and this is being adhered to religiously.

Therein lies the solution to your problem. Take action. There's an old saying from "Acorns Grow Oak Trees".

You have the analysis of your spending. Address your problem. Which can only be lifestyle if your income is as you say.

Don't expect any lender to be sympathetic to your request either.

nrsql

Seems to me that if you are serious about this you could cut down and pay off the credit cards in a few months.
If you go to interest only and it still takes you 2 years to pay off £20k on a £125k income then this doesn't seem to leave much margin for error. I would say you are still living close to your means.
After that you would still not have much left over to start paying off the mortgage. I wonder if you still have large outgoings that you are not willing to forgo.
Do you have prestige type things that you think look impressive and expensive but aren't all that useful? Prestige credit cards, clubs that you rarely visit,

Some time ago (about 8 years) I reviewed all my outgoings from my current account and discovered £4k per year wasted. Insurance on things no longer owned, duplicate insurance, internet connections no longer there, subscriptions for things at previous addresses, and more importantly things I no longer had time or inclination to make use of.

I have friends that have been in a similar situation to you and think that economising is a short term thing to get out of debt and the first time attempted it has always failed as after a few months they think it is going well and can relax and take the expensive holiday or replace things in the home as a short term blip.

DontWorryBeHappy

You say £1600pm on £200k over 10 years, that's not possible
0% interest that would be £192k. B&B must be charging something? I would have expected something nearer £2kpm
These were/are estimates. We pay £1646.15 per month.

gone from over spending to min payments on relatively(3mnths net) small debt, not that serious a chat.
No holiday planned for the next two years or until we are debt free (excluding our mortgage). We have recently sold one of our two cars leaving us with an X reg Land Rover. We have cancelled our Sky subscription. I have given up smoking.

ViolaLass

DontWorryBeHappy wrote: »

You say £1600pm on £200k over 10 years, that's not possible
0% interest that would be £192k. B&B must be charging something? I would have expected something nearer £2kpm
These were/are estimates. We pay £1646.15 per month.

But it still doesn't add up.

DontWorryBeHappy wrote: »

gone from over spending to min payments on relatively(3mnths net) small debt, not that serious a chat.
No holiday planned for the next two years or until we are debt free (excluding our mortgage). We have recently sold one of our two cars leaving us with an X reg Land Rover. We have cancelled our Sky subscription. I have given up smoking.

Have you tried a spending diary? Where is your money going each month? If you have £6.5k a month, of which just over £2k is going on debt, where is the rest going?

somethingcorporate

DontWorryBeHappy wrote: »

You say £1600pm on £200k over 10 years, that's not possible
0% interest that would be £192k. B&B must be charging something? I would have expected something nearer £2kpm
These were/are estimates. We pay £1646.15 per month.

gone from over spending to min payments on relatively(3mnths net) small debt, not that serious a chat.
No holiday planned for the next two years or until we are debt free (excluding our mortgage). We have recently sold one of our two cars leaving us with an X reg Land Rover. We have cancelled our Sky subscription. I have given up smoking.

If you are paying £1,646.15 then either your term is not ten years or your balance is not £200k.

£1646*12*10 = £197.5k which takes no account of any interest.

Care to clarify?

Where is your money going? We have less income yet support a bigger mortgage and could put more than £500 towards our credit card debt (if we had any). Where is the £4k+ cash a month going?

DontWorryBeHappy

Your thinking seems to be how can we keep our spending as high as possible and delay the debt repayment.
The thinking is that we want to clear these credit card debts as quickly as possible because of the high rates of interest they attract. Our spending is HIGH - fact !!!

beecher2

DontWorryBeHappy wrote: »

Your thinking seems to be how can we keep our spending as high as possible and delay the debt repayment.
The thinking is that we want to clear these credit card debts as quickly as possible because of the high rates of interest they attract. Our spending is HIGH - fact !!!

You need to cut down on the spending - where is it all going if you've cut back on Sky, holidays, cigarettes?

DontWorryBeHappy

You need to be sure if you change mortgage that you do it for a better rate than you have now. Missed payments will affect an application and may mean best rates not available.
I am paying an exceptionally good rate of interest on my mortgage. I think it is tracking at 1% above the Bank of England rate. However, I suspect that the BoE rates will not remain this low for much longer so it's all about the timing of when to shift.

Speak to a broker and get an idea of what may be available
We have lined up a chat with a Mortgage Advisor for Monday evening so we'll see how that goes but I am already starting to think that we are going to have to sit it out for the next couple of years until our children get through University/Training.