do I have to change to repayment?

bird78_2

Hi - I was hoping for some advice please.

I bought a 3 bed mid terrace in 2005 for £115k, the mortgage on it is £109K and we have been interest only from the beginning. Our fixed rate is coming to an end, thankfully as it is over 6% so we should notice a difference there but can the bank make us change to a repayment or can we stay interest only?
someone mentioned that there needs to be a 75% ratio before you are allowed to be on interest only but I am worried about the cost of the mortgage increasing.

thanks in advance

ViolaLass

Do you have a plan for repayment?

bird78_2

it is to switch to repayment but when we have cleared some existing debt, I am in a DMP and have managed to clear over £9k but still have a long way to go.
Is it better to switch to repayment now and reduce the DMP payments?

Thrugelmir

Better to increase the DMP payments.

Or alternatively split the reduction in the mortgage between the DMP and making an overpayment on the mortgage, while still leaving it on an interest only basis.

bird78_2

thanks for your reply - C&G can't make me switch to repayment? do I have to go onto another fixed rate or tracker as they charge for this and because we are on a DMP they won't add it on to the loan - sorry more questions but want to know my rights

Thrugelmir

Your "rights" are limited.

The C&G cannot force you to move onto a repayment basis. Nor do they have to allow you to move to a different mortgage product. Your current mortgage product should either specify the interest rate you default onto or the basis of the ongoing rate, i.e. SVR.

If you drop onto the SVR rate of 2.5% this may allow you to tackle you DMP quicker. Hence my suggestion of using part to overpay your mortgage. Even if it is only £50 a month for example. At least you are starting to make inroads.

The inherent danger of interest only. Is that time runs away. Something crops up that stops you switching to repayment. So progressively the monthly amount required to pay off the mortgage increases.

bird78_2

Thank you for your help - will wait till c&g contact me with what the rate is for when I come out of my fixed rate and re-arrange the dmp

Thanks again