switching to IO deal with same lender mid-term

ferry

For reasons of affordability can I approach our current lender to see if they will allow us to switch to an interest only deal for the remainder of our term if we meet the criteria?.
Also Im not migrating away away from our lender so will redemption fees be an issue if we can proceed?

Thanks as usual
F

Thrugelmir

If you switched to an interest only mortgage what plan would you put in place to repay the capital balance?

East_Shore

I'm guessing you're tied into your mortgage deal, if you switch from repayment to interest only you're only changing the repayment type and not changing the terms of your mortgage (as you're still on the same mortgage deal) so this shouldn't trigger any early repayment charge (hope this makes sense!!). Some lenders do charge an admin fee for switching this, anywhere from £0 - £75 in my experience.

The bank/building society will probably ask how you intend to pay the mortgage off if you switch to interest only, some lenders will only let you do this if you put a repayment vehicle in place (endowment, ISA, pension etc), whereas some lenders will allow you to use 'sale of property' as your repayment vehicle although the lenders are tightening criteria up on this.

ferry

Yes-its a repayment mortgage at the moment on 4.79% with 7 months left on the deal.
My aim is to reduce my mortgage payments for a short period of time.
I'll need to consult my lender on what their requirements will be in terms of a repayment vehicle but the idea is to overpay into a saving scheme.

dimbo61

What does the mortgage revert to in 7 months ?
Who are you with ? read the paperwork that came with the mortgage! What does it say SVR or some kind of tracker deal which might be alot better than you are on now.
Give your lender a call and ask lots of questions
If you have lots of equity they may allow you to go IO for 12 months ( for example)

ferry

dimbo61 wrote: »

What does the mortgage revert to in 7 months ?
Who are you with ? read the paperwork that came with the mortgage! What does it say SVR or some kind of tracker deal which might be alot better than you are on now.
Give your lender a call and ask lots of questions
If you have lots of equity they may allow you to go IO for 12 months ( for example)

With Nationwide on a 2yr fixed deal at the moment that reverts to SVR at the end of the term.

Out of interest any experiences with Nationwide being understanding and not the more stricter end of the scale?

Thrugelmir

ferry wrote: »

Out of interest any experiences with Nationwide being understanding and not the more stricter end of the scale?

The NW will review on a case by case basis. As peoples circumstances do differ.

Switching to i/o for the remainder of the term does not address the issue of affordability. As the amount required to fund an alternative repayment vehicle is going to be equally as high if not higher.

dimbo61

So the Nationwide SVR is 3.99% I THINK ! please check but are you sure its the SVR and not the BMR which is 2.5%
Is this less than you are paying now? on the fixed rate deal.
If Nationwide allow you to go on Interest only for a while does this just delay the problem for a while?
when you go back onto repayment your mortgage costs will be more each month as you will have a shorter mortgage term left.
Have a look on the debt free board for ideas and good luck