Interest only mortgage, but no endowment policy !

issy0503

I had a endowment policy many years ago and cashed it in after not being able to keep up the payments, but I continued with the interest only mortgage, it has 11 years left to run, I am 49 years of age and self employed on a low income, I have never been in arrears and the mortgage balance is around £35.000, do you think the bank will let me change to a repayment mortgage, when the fixed interest rate I am on now, ends in January 2012 I'm with Santander by the way, any advice much appreciated

new_home_owner_3

shouldnt be a problem you can change to a repayment and pay it over what period you want up to the age of 65, it can be longer but it depends how long you want to work for and what your pension will give you when you retire.

depending on how much you can afford to pay you should be able to pay 35000 pound off very quick.

HappyMJ

If you save £3,000 a year into tax free ISA's you'll have enough money to pay it off in full in 11 years time. Depends on what risk profile you wish to take. Overpay or invest?

dunstonh

do you think the bank will let me change to a repayment mortgage

They will do it willingly.

You dont need to wait until the end of your deal. The repayment method and the deal you are on are two different things. You can changeover now. The sooner you do, the less it will cost you.

opinions4u

issy0503 wrote: »

do you think the bank will let me change to a repayment mortgage, when the fixed interest rate I am on now, ends in January 2012 I'm with Santander by the way, any advice much appreciated

Don't wait. Do it now.

issy0503

Thanks everyone, what should I say if they ask me why i havent got an endowment policy? or why I want to change Thanks again

kingstreet

Here's the bad news.

On a 4% fixed rate, you're currently paying £116 per month interest-only.

On a 4% fixed rate, you'll be paying £333 per month for a repayment mortgage over 11 years.

If your current fixed rate is above 4%, the payments will, of course, be higher.

You mention you are self-employed and on a low income. If you cannot afford the increased payments, I suggest carry on paying only the interest, but in addition you save as much as you can into an ISA until your fix ends next year. At that time, use the ISA money to reduce your mortgage balance and look to remortgage to a new lender to get a remortgage over a more affordable term, but certainly ending before you turn 65.

Look for fee-free deals which cost you nothing to change lenders.

issy0503

Yes I realise the payments will be much higher, think I will ask them to extend the mortgage.

kingstreet

I've just realised there's an error in my post from yesterday.

kingstreet wrote: »

Here's the bad news.

On a 4% fixed rate, you're currently paying £116 per month interest-only.

On a 4% fixed rate, you'll be paying £333 per month for a repayment mortgage over 11 years.

If your current fixed rate is above 4%, the payments will, of course, be higher.

You mention you are self-employed and on a low income. If you cannot afford the increased payments, I suggest carry on paying only the interest, but in addition you save as much as you can into an ISA until your fix ends next year. At that time, use the ISA money to reduce your mortgage balance and look to remortgage to a new lender to get a repayment mortgage over a more affordable term, but certainly ending before you turn 65.

Look for fee-free deals which cost you nothing to change lenders.

Alteration in bold. Apologies.

ChopperST

Why not simply continue on your interest only mortgage but make regular overpayments every month? (Providing your product allows this - most allow 10% of the outstanding balance).

I am in the same situation as you being self employed and some months have more left over than others and overpay my mortgage accordingly allowing me flexibility on my payments, I guess it depends on your discipline to overpay though. Also look into what your mortgage rate will revert to at the end of your fixed deal (obviously depending on the BOE base rate and changes over the next 7 months).

You have a relatively small mortgage and therefore a new product may cost you more in fees etc. etc. Obviously depends on your circumstances and cashflow but another option to paying into a savings account that may only pay 3% AER?

issy0503

Thank you Chopperst, what a good idea, will look into that!