Change to Repayment?

Lisa1978

Rang my mortgage company today regarding the house i let out.
I found out the following :

Balance £95k made up off :

£22k repayment, fixed at 6.99% until 2/9/11
£73k IO @ standard variable 4.24%

They advised there are no better deals/rates available for me .
I pay £430 a month and receive £450 from tennant. I asked mortgage provider how much it wld be to change it all to repayment, they said £616/month which is wayyy too high to pay in a property i don't live in. That was for the remainder of the term, which is 20years 6 months. I rang again and asked for 25year mortgage and was more manageable at £515. I am thinking of getting another quote for even 28years. I am 32years old if that helps.

My qu is, wld it be worth me paying an additional £85/month on top of my current mortgage? In the long run would my mortgage reduce by much? The propery is worth approx £100 but i'd expect i'd only get £90k for it if tried to sell. I'm hoping to keep for at least another 5years. Also, my worry is if/when i become pregnant can i afford a higher mortgage or could i reduce again in a few yrs if needs be?

Thanks

anselld

It sounds like you are not planning to pay off the mortgage until you sell so moving to repayment at a higher interest rate is counter productive. You should just get as much as possible on the lowest rate you can get, even if that is IO, and then use any surplus you can to make overpayments to reduce the neg equity.

CloudCuckooLand

What's your plan for when interest rate rises make your variable rate go above the Fixed deal..?

If you intend to be pregnant shortly, you need to build up cash reserves for the maternity.

And you would be sensible not to rely on converting back to a cheaper basis, as in negative equity already you may find that impossible.

For £20 a month - which you never see, due to maintenance, agent fees, gas safety check etc - is it really worth holding onto?

If your tenant leaves...it risks repossession and cheap disposal by the lender and them pursuing you for the shortfall.

Lisa1978

CloudCuckooLand wrote: »

What's your plan for when interest rate rises make your variable rate go above the Fixed deal..?

If you intend to be pregnant shortly, you need to build up cash reserves for the maternity.

And you would be sensible not to rely on converting back to a cheaper basis, as in negative equity already you may find that impossible.

For £20 a month - which you never see, due to maintenance, agent fees, gas safety check etc - is it really worth holding onto?

If your tenant leaves...it risks repossession and cheap disposal by the lender and them pursuing you for the shortfall.

thanks for reply... i currently have 'extra' cash after all bills of approx £500-£800 depending on income. I am paying off credit cards with most of it but i could pay the additional repayment amount plus save £100-£200 a month for a 'baby fund' and pay the rest of credit cards. I have already reduced by a few thousand :). We are not prepared to get pregnant until we are confident that we can afford a child!

the house will be worth holding onto if i change to repayment and keep for at least another 5-10 years, or longer as a pension. I have a great tennant and know if she leaves i can get another easily - due to the fact that i'd double figure people looking the house after it was only empty 2wks before and i have another person wishing to move in if she ever leaves.

CloudCuckooLand

Perhaps you could put the rent up then...

Lisa1978

I think i might try that, even by £20/month. Wld need to check out what others in the area are charging first as i don't want to loose a good tenant iyknim Thanks again xx