Currently with NRAM... Renting options?

Daza1604

He all... I posted a while ago wanting some advise about my best options... I was advised basically my only option is to try and overpay to reduce the loan and then have the option of getting a new mortgage deal elsewhere.

Basically 4 years ago at the age of 21 I bought my 1st house for £120,000. Basically walked in to northern rock who I held a current account with and said I wanted a mortgage. (I'm sure people who are clues up on here are already grimising at this as I presume I should have at least shopped around and things as I'm guessing the person at northern rock rubbed there hands together when a 21 yr ols who hasn't a clue walked in).
The mortgage I was sold was at a fixed rate for 5 years £111,150 as a secured loan @6.39% and £8,850 as an unsecured loan at 6.39%. (30 year mortgage)

My mortgage has now changed in the fact that it is no longer with northern rock it is with a company called NRAM. I have called them this week and they say although the company name has changed they still honour the contract that I signed.
The contract states that after my 5yrs fixed I will drop on to the standard variable rate.... Currently this is 4.79%.
On my latest mortgage statement it says I still owe the following .. £107,000 on the secured loan and £8,500 on the unsecured... That's £115,500 altogether yes I have another year of payments to make but I'm still gonna owe say 114k.... I bought the house for 120k but now believe it to be only worth 110-115k max.

My girlfriend also has her own place and we have talked about moving in together and renting out my place... I have consulted NRAM and they said other the phone they wouldn't see a problem with me renting mine out as long as I could prove I can afford the mortgage if the property was empty but I would have to fill in a proper application form.
What I am wondering is say I was to rent the house for 650p/m this would cover the mortgage....am I better extending the term of my NRAM mortgage so therefore am able to overpay more that will come straight off the top figure of the loan or is it six and two threes in the long term?

Any advice would be appreciated

Daza1604

any1 got any ideas if this is a.possible and b.better of than keeping it on the term it is on?

Thanks

poppy10_2

Daza1604 wrote: »

I better extending the term of my NRAM mortgage so therefore am able to overpay more that will come straight off the top figure of the loan

No, definitely not. You will end up paying more in interest by extending the loan

Daza1604

I understand that by extending the term would mean I am paying more interest.... But will the fact I'm then able to overpay more from the overall loan not outweigh this??

poppy10_2

Daza1604 wrote: »

I understand that by extending the term would mean I am paying more interest.... But will the fact I'm then able to overpay more from the overall loan not outweigh this??

You're not overpaying more. You are paying back the same amount each month, i.e. whatever you receive in rent. You are reducing the required monthly repayments by extending the term, but the interest rate remains the same, the interest is still piling up at the same rate, and by extending the term you will end up owing and having to pay back more money.