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Extend term or stick to interest only?
Littleangelcakes
Posts: 6 Forumite
I wonder if anyone has some advice for some thoughts I have regarding my interest only mortgage.
I switched to interest only 5 years back when I split from my Ex. I have been meaning to go back to repayment but the payments are just to high. I'm 34 years old and there's 22 years left on my mortgage. It's fixed until april next year on 4.69%.
My inetntion is to switch back to repayment within the next two years, however, I wondered if I entend the term, I could afford a repayment from now.
My only thoughts are, would it cost more in the interest for a repayment over the longer term versus paying interest only for the next two years and switch to repayment after that period with a shorter term?
Any advice on how to calculate which is the cheapest option would be appreciated.
I switched to interest only 5 years back when I split from my Ex. I have been meaning to go back to repayment but the payments are just to high. I'm 34 years old and there's 22 years left on my mortgage. It's fixed until april next year on 4.69%.
My inetntion is to switch back to repayment within the next two years, however, I wondered if I entend the term, I could afford a repayment from now.
My only thoughts are, would it cost more in the interest for a repayment over the longer term versus paying interest only for the next two years and switch to repayment after that period with a shorter term?
Any advice on how to calculate which is the cheapest option would be appreciated.
0
Comments

There are couple of issues here.
1) If you want to extend your term and switch to repayment now you should be able to do this. Your lender will be keen to see your mortgage is repaid before your retirement date, so as long as you keep the term so the mortgage is gone by age 65 this should be feasible
2) If you can't afford to switch to repayment now, then why are you going to be able to do this in a couple of years when you will have even less time to repay it having had a couple of years in interest only.
The cheapest thing in the long run is to pay off your mortgage as quickly as possible. The longer you stay on interest only and the longer you extend the term the more interest you will end up paying0 
I would stay interest only and start overpaying as much as you can without penalty.
Then you can foucus on a stratagy to meet any shortfall
What rate at the end of the fix?
if you go to repayment you are contracted into higher payments if you stay interest only you are in control.
to see what the repayents would be just stick the numbers in a calculator and change the term.
http://www.whatsthecost.com/mortgage.aspx
at 4.69% your repayment by waiting 2 years will go up by £35 per £100k0 
Thank you. The reason I would be able to switch in a couple of years is because my financial situation will be greatly improved and I will be able to to afford the higher payments. However, referring back to my question, I wondered would it be better to extend the term and switch to repayment now (at a level I can afford now which is not likely to be more than the amount I'm paying for interest only), on continue to pay another two years interest and switch to repayment at the higher level and shorter term in 24 months.
Thanks for the link. I've always wondered what the difference between repayment and interest only and over paying was!0 
getmore4less wrote: »I would stay interest only and start overpaying as much as you can without penalty.
Then you can foucus on a stratagy to meet any shortfall
What rate at the end of the fix?
if you go to repayment you are contracted into higher payments if you stay interest only you are in control.
to see what the repayents would be just stick the numbers in a calculator and change the term.
at 4.69% your repayment by waiting 2 years will go up by £35 per £100k
The rate at the end of the fix is 4.29 so lower than my fixed rate.0 
I think I've worked out my options... If I leave my mortgage interest only for 2 years and switch to repayment (I've calculated on 4.69%) on my current term of 20 years, I'll pay 84699 in interest but will be mortgage free in 22 years. This is obviously if I don't make over payments which is something I intend on doing.
If I extend my mortgage to a 30 year term and switch to repayment now, I'll pay a total of 114603 in interest and will be mortgage free in 30 years (
So my best option is to stay on interest only for two years and switch after, keeping to my current term.0 
Term makes no differnce in the end.
What matters is the monthly payment
The more you pay and the earlier you pay the lower the total interest will be.0
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