changing to interest only-problems

daraya

due to debt problems and lower income we have problem with paying our mortgage. We want to change it to interest only which could help a lot but bank doesn't want to let us. They keep saying we can not afford one. But surly we can as it will be less then half of what we should pay now. Things don't look well as we already about £2500 behind with payment. What shall we do? any advice please.

Thrugelmir

If you have debt problems and are already in arrears with your mortgage then switching onto an interest only basis is unlikely to solve your fundamental issues. The solution may require a more radical approach.

HappyMJ

You still need to actually pay the mortgage capital off. They will let you if you are ahead with repayments and/or have a large amount of equity but if you are behind with repayments with little equity and no other form of savings such as ISA's then it's unlikely that they will let you.

After reading one of your previous posts you state you have £31k of unsecured debt with little prospect of paying it back. Have you considered something else to resolve your debt issues?

Would you like to post a Statement of Affairs here to see how forum members can advise you? I suggest you make the payments to your mortgage priority number 1 and everything else can go unpaid. A roof over your head is much more important than paying for credit cards.

daraya

you mean selling? that is really last thing we want to do. We trying sort ourself out, my partner will be changing job and me going back to work when my daughter goes to school September but until than we have to do what we can.

HappyMJ

daraya wrote: »

you mean selling? that is really last thing we want to do. We trying sort ourself out, my partner will be changing job and me going back to work when my daughter goes to school September but until than we have to do what we can.

It's April now September is 5 months away. Do you have enough income to pay the mortgage payments until then? Ignore (almost) every other bill no other bill can force you out of your house. Do you claim all the benefits you can? Tax credits, council tax benefit?

daraya

thanks HappyMJ
We have actually quite good equity.
We are not paying cc now, just trying to set up reduce payment.

daraya

HappyMJ wrote: »

It's April now September is 5 months away. Do you have enough income to pay the mortgage payments until then?

If we change to interest only we will have enough.

Thrugelmir

daraya wrote: »

you mean selling? that is really last thing we want to do.

Yet may be the option. That lifts the stress and worry. Puts your finances back on a stable footing and enables you to enjoy life again.

HappyMJ

daraya wrote: »

If we change to interest only we will have enough.

OK...so how much income do you have? What's the value of the house? What's the value of the mortgage? What's the interest rate that they are charging? What repayment do they want?

Pay whatever you can....but do try and pay back the £2500 of arrears as soon as possible. If they refuse the change to interest only then at least pay the interest charged anyway.

daraya

Value of flat about 220000
interest 4.23% (we are on standard rate)
outstanding 135000, monthly £935

HappyMJ

daraya wrote: »

Value of flat about 220000
interest 4.23% (we are on standard rate)
outstanding 135000, monthly £935

Go back to them and negotiate. Ask if they can capitalize the arrears onto the mortgage. Pay the interest anyway at the very least. Have you considered closing the business down (even if it's temporary) and claiming JSA - Job seekers and then claiming SMI so that the DWP will pay the interest for you. The bank must be assuming you have some income and can pay it so if you declare you have none except benefits then they will be obliged to help by allowing interest only.

If you play your cards right then you should not have any fear of repossesion. Get some advice from somewhere like CAB.