Stuck on Interest Only but want to move forward?!

GoldenEye07

Hi all,

Looking for some advice please,

I currently own a flat with a friend, we have been there 4 years and our mortgage is with Standard Life, the problem is we started off on an interest only mortgage and intended to get off this after the 2 year discounted period however with all the recession etc it simply wasn’t possibly and we bounced onto the Standard Life SVR (at the time they wouldn't offer us any other products) still on interest only, now this wasn’t a massive problem as the base rate continued to drop and our payments got cheaper but I’m fully aware we are not paying off any of the capital so the likelihood is we are in neg equity at the moment.

Now my fianc! had been staying with us and we recently got married and although the 3 of us are all good friends and we are comfortable with the living situation my wife and I would obviously like to have our place now. We paid for all our wedding and honeymoon on our own so now we are back to reality again and back saving – realistically its going to be next year before we can make our move so when the time comes what is the best option with the old flat? Rent it out or cut our losses?

I’d be quite happy keeping it and renting out but my worry is the base rate is going to start creeping up and the rent doesn’t cover our costs, also would having this mortgage affect my chances of a second joint mortgage only this time with my wife? What are the rules with that…..?

We bought the flat for 172k and have a 166k IO mortgage with Standard Life. Should I be looking to do anything in the meantime with this current mortgage?

Any advice or ideas are appreciated, thanks for reading.

ACG

If you can get the mortgage lender to transfer your mortgage to a "Let to buy" there shouldnt be an issue.

If not then you have 3 choices:
- sell it and walk away with a small debt.
- see if your friend would be prepared (and able) to take on the full loan amount.
- start paying off the mortgage to bring it down, you will be paying less interest each month and it should get easier to pay it off.

The downside with the last option is you are usually only limited to overpaying by around 10% a year.

GoldenEye07

Thanks for taking the time to reply, anyone got any advice on this part?

"I’d be quite happy keeping it and renting out but my worry is the base rate is going to start creeping up and the rent doesn’t cover our costs, also would having this mortgage affect my chances of a second joint mortgage only this time with my wife? What are the rules with that…..?

We bought the flat for 172k and have a 166k IO mortgage with Standard Life. Should I be looking to do anything in the meantime with this current mortgage?"

GoldenEye07

Bump....Anyone else?

jimjames

You would need the mortgage on the rented place converted to a BTL or you will not be able to take out another mortgage unless you have a large enough income that could support 2 properties with the income multipliers used.

GoldenEye07

Just as an update to this I called Standard Life today to try and get an update on this.

The guy informed me that because SL where bought over by Barclays last summer they still not offering any alternative products so I am stuck on this interest only deal.

So we still owe them 166k and he said if I applied to get it changed to a LTB mortgage its likely they would ask that I pay off 10% so we would need to find 17k to do this...I assume if I went with any other lender this would be the same (10% LTV at best)?

We owe SL 166k no matter what here and as its looking very expensive (unless someone can see a way I'm missing??) to move onto a LTB mortgage is the only option to try and sell and possibly take a nasty hit if its worth less than 166k??

thanks for reading, any advice appreicated.

Thrugelmir

So why haven't you started to repay the mortgage?

With 3 incomes should be possible to make inroads into the debt.

GoldenEye07

The mortgage isn't cheap even at interest only and last year my wife and I had to commit every penny to our wedding and we now need to get some cash together for our future home. She isn't really involved with the flat (although now we are obviously married) it was always a venture with my friend that has went a bit wrong once the market crashed...

BoGoF

GoldenEye07 wrote: »

The mortgage isn't cheap even at interest only and last year my wife and I had to commit every penny to our wedding and we now need to get some cash together for our future home. She isn't really involved with the flat (although now we are obviously married) it was always a venture with my friend that has went a bit wrong once the market crashed...

So what is your interest rate?

And you didn't have "to commit every penny to our wedding". That was a decision you took to the detriment of your financial position.

Thrugelmir

GoldenEye07 wrote: »

The mortgage isn't cheap even at interest only and last year my wife and I had to commit every penny to our wedding and we now need to get some cash together for our future home.

Not being judgemental, but that was your call. You made it your priority.

Is your friend looking to sell out?

At least start paying something off the mortgage that will enable you to sell it and move on. As you reduce the debt you'll pay less interest every month. Little point saving money elsewhere that in effect is earning interest at a lower rate.

GoldenEye07

The rate is 5.8% I think.

yeah ok I take both your points that we didn't need to save for our wedding but it was something we felt was long overdue and we payed for it almost entirely by ourselves so it did take a bit of saving.

My friend is now in a long term relationship now also and is looking to move in with his OH, she has her own property but we are good enough mates that he would never leave me in trouble.

So yes I take your very valid points guys but we are now where we are, so I suppose the hope was to get something sorted at some point this year - would overpaying for say 6 months help us any do you think?