Moving from variable to interest only mortgage with Scottish Widows - help!

liemzie

Background:
I took a 100% proffessional mortgage with Scottish Widows 4 years ago, our fixed rate ran out last year. Once in this period I switched to interest only payment short term to free up some money for our wedding.

Our current plan is to move abroad summer 2012, so we need to save money and our biggest outgoing is our mortgage repayments! We also want to reduce our mortgage so we can rent the house out at a low rate when we are abroad (our house would rent for £500-550pcm).

Scottish Widdow no longer do short term changes, they said I needed to write to them requesting a change to an interest only mortgage stating how the mortgage would be repaid at the end (even though I only intend to be on interest only for 2 years). I did this to the best of my ability. But got a letter back saying:

'Currently any change to Interest Only needs to be long term with a suitable repayment vehicle in place. Scottish Widows Bank currently doesnt offer short term changes to Interest Only. If you wish to change long term you will need to request this in writing stating your repayment vechicle.

As your request does not fall under the Banks current policy I have been unable to carry out your request'

I asked my mortgage advisor for help and have rung them several times over the last 2 months but the guy seems to be avoiding me.

Can anyone help, Im desperate to get saving and start planning our move abroad. I currently pay approx £780 a month but changing to interest only would be £440. Thats a huge saving.

If you can direct us elsewhere or tell us what we need to do to make this happen I would appreciate it so much!!!!

Thanks Liemzie x

beecher2

I can't see that you can make it happen as your LTV will be too high to remortgage elsewhere. Presumably you're on the SVR now, so need to plan for when rates rise - is selling up maybe a better option?

liemzie

Beecher2 - thanks for replying. So you dont think Scottish Widows will let me change to interest only if I set up a 'suitable repayment vehicle'?
If interest rates became too high then I guess we would have to sell, but not sure we'd be able to get back on the property ladder for 5+ years afterwards as would have to save for the large deposit...

InMyDreams

liemzie wrote: »

So you dont think Scottish Widows will let me change to interest only if I set up a 'suitable repayment vehicle'?

But wouldn't a 'suitable repayment vehicle' cost you similar to what you are 'saving' by not paying off your mortgage? So what would be the point?

liemzie wrote: »

If interest rates became too high then I guess we would have to sell, but not sure we'd be able to get back on the property ladder for 5+ years afterwards as would have to save for the large deposit...

You'd have to do this anyway. In fact it'd be even harder if you go to interest only now as you'd have less left over when you sell this place, so you'd have to save even more for the next deposit.

BoGoF

Another thing to remember there is no guarantee you will get consent to let and if you do you may have to pay a higher rate.

hcb42

If you are interest only, you are not really on the ladder at all..Selling seems sensible, you are simply "renting" this house by wanting to be IO

MikeT007

Hi liemzie

I feel your frustration. I'm in the process of re-mortgaging and I'm actually finding this incredibly frustrating ! I spoke with Scottish Widows yesterday and I must admit to being incredibly unimpressed.

I wanted a £180k interest only, fixed rate offset mortgage so I can manage the overpayments myself. They asked me what repayment vehicle I had in place and I told them I had a Stocks & Shares ISA (which is one of their criteria items) with £40k in it and a plan to put in £10k per annum over the 20year term.

She told me that it wasn't good enough as SW have now "toughened up" their criteria and I could only qualify for an interest only deal if my "repayment vehicle" was already worth £180k !!!!! I asked what the point of me asking for a mortgage would be if I already had the money... but it just washed over her head.

Honestly, these organisations are being ridiculous ! Sorry this doesn't give you your answer - just empathising with your situation. You're not alone with these silly rules !

Best wishes

Mike

kingstreet

MikeT007 wrote: »

Hi liemzie

I feel your frustration. I'm in the process of re-mortgaging and I'm actually finding this incredibly frustrating ! I spoke with Scottish Widows yesterday and I must admit to being incredibly unimpressed.

I wanted a £180k interest only, fixed rate offset mortgage so I can manage the overpayments myself. They asked me what repayment vehicle I had in place and I told them I had a Stocks & Shares ISA (which is one of their criteria items) with £40k in it and a plan to put in £10k per annum over the 20year term.

She told me that it wasn't good enough as SW have now "toughened up" their criteria and I could only qualify for an interest only deal if my "repayment vehicle" was already worth £180k !!!!! I asked what the point of me asking for a mortgage would be if I already had the money... but it just washed over her head.

Honestly, these organisations are being ridiculous ! Sorry this doesn't give you your answer - just empathising with your situation. You're not alone with these silly rules !

Best wishes

Mike

These are the LTSB group rules, so you'll get a similar response from C&G, Halifax, BoS, Birmingham Midshires etc.