changing to interest only

supersaverwannabee

Hi there!

This is my first ever post so stick with me I may take a while to get the hang of this!!

Myself and my husband bought a house 5 years ago for 250k - at that time we were just out of uni and had trainee positions so our income wasn't very high, we went for interest only with the Halifax.

At that time they did not ask for any evidence of future investments regarding how we were ever going to pay for the 250k, we had only planned to go for interest only for a year but several years and 2 children later - we only got round to going full repayment last year.

At the moment we are thinking of having another child but since I am self employed with no maternity leave etc I will have to take time off with no income so I phoned the halifax to see if we could go back to interest only if we have another baby for this 6 month period.

The Halifax are now asking for investments or endownment policies as evidence of how we are going to pay this off - I said that we would only need to interest only for a 6 month period as we dont have other investments. They also wont let us take a mortgage break as our house has now dropped in value so we have no equity.

I feel so annoyed that they were literally handing out mortgages a few years ago even when our income was so low - we had just graduated.


Has anyone got any advice for me?

Many thanks!!!!!!!

jimjames

Out of interest how do you intend to repay the mortgage? Every time you switch to interest only or delay repayments you are increasing the amount of debt left to repay and therefore increasing future repayments. As happened last time sometimes circumstances mean that things get left for longer than intended so the 6 months could easily extend again. A repayment mortgage over the last 5/6 years would have meant that you had paid off some capital so may have had some equity in the house which may be another reason Halifax do not want this changed.

It might not be the best answer for your current situation but Halifax are being fairly responsible which most lenders certainly weren't a few years ago.

_Andy_

So you're annoyed that they gave you the mortgage to begin with?

supersaverwannabee

that prob came out wrong - we were delighted to get the mortgage but i'm just annoyed at our over - enthusiasm. better get to saving then!

InMyDreams

supersaverwannabee wrote: »

but since I am self employed with no maternity leave etc I will have to take time off with no income

But you *can* get maternity allowance for those six months you want to take off. £128.73 a week for up to 39 weeks. (Assuming you are registered as self employed and have been paying your NI contributions.) You don't say how much your income is, but even if it is small, I would not claim Small Earnings Exception if you are considering having a baby. (If you claim small earnings, you can avoid paying the NI but your MA will only be calculated as 90% of your normal take home.)

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Expectingorbringingupchildren/DG_10018869

Miss_J

You may find that if/when you take maternity leave you can claim additional income from tax credits. I was allowed to do this in 2004 when I last had maternity leave, I went onto SMP after 6 weeks so my income significantly dropped, called tax credits and they did an immediate change on my claim and upped my tax credit payments. Didn't match my income but it certainly helped.

supersaverwannabee

Thank you both.

I didnt know i could get tax credits, can you get them even with maternity allowance? we dont get them at the moment. Every little helps!

Evilm

Unfortunately since they became joint with Lloyds (and the general credit crunch) all lenders have become stricter to supposedly avoid the crisis again.

To be honest they were difficult with me when I phoned for a quote to move from I/O to Repayment because I couldn't remember what the repayment plan we had put in place 3 years ago was. They wouldn't even give me a quote unless I moved over to repayment first on my current deal. Not helpful!

You could try to remortgage with someone else but if you have no equity then its unlikely to be able to get a good deal. I can only suggest finding something to help bring in some income during the maternity period - perhaps tax credits or a home business/odd jobs?

supersaverwannabee

Evilm - thanks for your post - really appreciate it! I do have the flexibility to work a few days here and there in my job while on maternity so I could do that but was trying to avoid this as i did this with my last one and it was a bit stressful to say the least - so i wanted at least 6 months completely off - might have to rethink everything! ARRGG these modern times! lol anyway thanks for the posts everyone!

mcc100

mcc100 wrote: »

I'll probably get shot to pieces by some posters, but below is an email I sent to Clinton Manning (Daily Mirror) on 16/9/2008 with my views on interest only mortgages.

Dear Mr Manning

Virtually everyone given an opportunity to air their views on television and radio is blaming the credit crunch for the sudden downturn in the housing market. However one of the real reasons is being hushed up, particularly by those involved in mortgage lending.

In 2005 the housing market had reached its peak due to the fact that the bottom end of the market had risen to a certain value whereby first time buyers had reached the limit of affordability. Normally the market would have stagnated and probably gradually fallen over a period of time.

However greedy mortgage lenders realised what was happening and as they were unwilling to lose business in the mortgage market they took the extraordinary decision to offer interest only mortgages to first time buyers without having to provide evidence of having a savings account/ insurance policy etc to pay off the mortgage at the end of its term. By doing so it meant that these first time buyers were able to afford to buy houses at a higher price than previously possible. The effect of this was to push the housing market beyond its natural peak to a level that was artificially inflated by 2007.

For example a first time buyer able to afford £600 per month would only be able to afford a repayment mortgage of £102000 over 25 years at an interest rate of 5%. The same first time buyer with an interest only mortgage would be able to afford a mortgage of £144000.

There are basically two types of first time buyers, those in their twenties and thirties who had never owned their own properties, and those older ones who had split from their spouses and were buying on their own for the first time. When offered interest only mortgages, those who queried the sensibility of them were told that they should look at it as being a better alternative to renting a property as after say five years they could walk away with several thousand pounds when the property is sold at a higher value. Those who did not query them were mainly the younger ones who had no understanding of mortgages and still believe that they will own their properties after 25 years.

Every first time buyer I know since 2005 has been offered an interest only mortgage and in my opinion it is mis-selling on a scale to compare with the endowment mortgages sold in the eighties and nineties. At least then, however badly performing the endowment policy, at least there would be some cash available to pay of the mortgage. Now there is none and the mortgage lenders have done nothing to ensure that the first time buyers have a means of paying off their mortgage. The outlook in a rapidly falling housing market for these first time buyers is grim to say the least.

Regards

X xxxxx

I can't offer any advice unfortunately, but one of my previous posts reiterates my view of mortgage lending a few years ago .....

zengirl

"There are basically two types of first time buyers, those in their twenties and thirties who had never owned their own properties, and those older ones who had split from their spouses and were buying on their own for the first time."

There is a third type (and this type will probably become increasingly common over time). I am 42 and have never owned my own home. I am married and have young kids. I have rented all my life (since Uni and through jobs and up till now). People are not only waiting until their late 30's/early40's to have babies, but also to own their first home. It's SO expensive to buy a house and scary that many (especially former students who may have debts etc) choose just to rent and rent.

Rent prices are escalating now though, and house prices dropping (?). If you have finaly got rid of any debt, and managed to save for a deposit, now's the time to buy (and this might not be the case until you've reached age 40, as in my case).