Variable Mortgage to Interest Only

Nerothefiddler

My daughter has recently re negotiated her variable rate mortgage for a further 18 months term. She is having difficulty meeting the repayments and asked her provider if she could change it to interest only. She was advised that she could only do this if she paid a fee of over £2000.00, is this normal, and is there any other way that does not incur a large fee, which seems rather ridiculous, when she is having financial difficulties already. I am long retired and not up to date with the intricacies of modern mortgages.

East_Shore

If a lender agrees to switch a deal to interest only there's normally only an admin fee to pay, cost normally between £0-£75 in my experience. Who does your daughter have her mortgage with, what is her current outstanding balance and current property value and is she tied in with her current lender?

madmish00

I've recently enquired with Nationwide about changing to interest only (not due to financial difficulties) and the fee is £50. The fee she has been quoted seems excessive.

A lot of lenders these days will only consider changing to interest onyl if the loan to value is less than 75% and additionally there are stricter criteria about providing details of the intended repayment vehicle at the end of the mortgage.

Nerothefiddler

Thank you very much for your replies. Will get the additional information from my daughter, and post tomorrow.

Nerothefiddler

Sorry for delay. Further information you asked for.
Yorkshire Bldg Soc.
Outstanding Balance £72000.00
Bldg soc. current property valuation £94.500.00.
Equity £22000.00.

The new mortgage is a two year fixed interest contract. (18 months remaining)
The loan to value does not meet the 75% criteria, is this a general requirement, or is it negotiable in some circumstances?. Is the large fee quoted because she is effectively locked into the two year contract?.

kingstreet

Is she being charged a large fee for changing to interest-only, or is she opting out of the fixed rate into something else and being charged the £2,000 penalty for doing so?

Unless we know what conversation she held with the lender, we can't really say what's happening.

Could she post here, herself?

Thrugelmir

Nerothefiddler wrote: »

The new mortgage is a two year fixed interest contract. (18 months remaining)

Most likely there's an ERC for exiting the product early.