Mortage hike question

shaftonred

Im hoping someone can point me in the right direction because despite owning an house for 9 years and arranging 2-3 mortages in this time I am none the wiser... think its down to a mixture of me not trusting my past mortgage advisors and all the different types such as tracker etc :huh:

I woke up this morning to the email about the mortgages looking set to increase which I have been expecting for sometime. We upgraded to a bigger house 3yrs ago and because we had been used to a 90k mortgage and we were about to take on a 150k mortage we decided to go interest only. This was with the intention of seeing how the first 6 months went with regards to council tax, bills and new things for the house before switching to a repayment which we had always had. Fast forward 2.5 years later and we are still enjoying the interest only of £300 per month, thankfully we have also been paying between £300-500 per month into a seperate account during this time.

The dilemma I am now faced with is that I am getting married in August so busy saving for this. I am also aware that if we leave this much longer then the interest rates will be rising and it could cost us in the long run.

For those of you who are a bit more switched on at this than me what would you suggest, would you
a) switch to a repayment mortgage and fix it for anywhere between 2-5yrs now
b) keep paying the interest only and paying money into another account which is used to pay off the money owed on the house at some stage
c) wait until after the wedding and change then

Any help is really appreciated as I havent even begun to look at the different types of mortages to work out which will be the best... thanks!!

kingstreet

I don't see any drastic changes before August, so get married first. You don't need two lots of hassle at this time.

Once you've got that out of the way, talk to independent brokers and have a look at what's available in the marketplace.

Finally, job one after you're married is to get off interest-only. Even saving into an account it is likely to be costing you, as the rate is lower than what you're paying for the mortgage?

shaftonred

Thanks, I had been thinking the same thing but then received an email this morning saying that they are set to rise having come out of recession?

What do you mean with regards to paying into another account as costing us? Doesnt it work that say if I have £5k saved up in another account that I can just pay this to the lender and our £150k mortgage then becomes £145k?

Sorry i really am not thick but this is one area which always stumps me!!

kingstreet

It's ok. What I meant is if you are getting 3% on your savings and paying 5% on your mortgage, it's costing you...!

2% each year the rates stay the same.

Of course you can use the lump sum to reduce your mortgage.

As to what might happen to interest rates, who knows. I don't think anyone is expecting much to happen in the very short-term. I guess you'll get more opinions as the day passes...