Switching to interest only to pay off debts

mintblue

Hi folks, long time lurker looking for some advice if possible.
As title says, we have credit card debt of £10,000 and are just about paying all bills with no extra money left over at the end of the month, mainly due to my partners business struggling.
My mortgage is up for renewel in May, so I have been on my current mortgage providers website to see what deals they have and the interest only deal got me thinking.

Current mortgage amount owed is £111000 with 17 years left £854 per month @5.99%. Interest only offer will be £322 per month @3.49 HVR for 2 years.

My thinking is, to swap to interest only for 2 year period, pay off debt, then when next renewel comes around, go back to repayment at whatever their deals will be (hopefully less than current 5.99%). I would be looking at reducing the term to 15 years, so in effect, I am back on track with my original repayment at hopefully the same or less monthly payments than now.

I hope this post makes sense. Am I missing anything? Am I dreaming that this is possible? I'm certainly no expert hence the questions.

Thanks in advance.

DannyboyMidlands

5.99% is a particularly poor rate. What's your LTV?

Can you not just switch to a cheaper repayment mortgage with a different lender?

mintblue

5.99% is a 5 year fixed ending in May. The amount I pay is slightly higher than it should be because we've had a mortgage holiday in those 5 years.
LTV is 53%
If I switched to repayment now, the only offer from current lender is 2 years @ SVR 2.50% £668 per month. Not enough saving to pay off debt.

kingstreet

Interest-only isn't a product option. It is a concession you'll need to request from your lender. It's now associated with those in payment difficulties and getting IO with no repayment vehicle is a lot more difficult now than it ever has been.

All you can do is ask.

HappyMJ

You can add the £10,000 of unsecured debt to the mortgage and instead of making the repayments to the unsecured lender you would make them to your mortgage lender instead. You could save on the interest that way. However, if you pay the debt over the length of the mortgage term it will cost you more.

mintblue

kingstreet wrote: »

Interest-only isn't a product option. It is a concession you'll need to request from your lender. It's now associated with those in payment difficulties and getting IO with no repayment vehicle is a lot more difficult now than it ever has been.

All you can do is ask.

We phoned them and because our deal doesn't end until May, they couldn't commit to any definitive answer, but the advisor did say that there may well be deals available at the time of renewel.
Looks like they will be getting all the details of our debt which we are not comfortable with but hey ho. Thanks for advice.:beer:

Thrugelmir

What's the SVR when the fixed rate term ends?

mintblue

On their website it say 2.50%.

Thrugelmir

Maybe that's the best option. Maintains your mortgage repayments while freeing up cash to tackle your debts.