A little mortgage advice please?

matthewr

Hi all, I'm very sorry if this is a repeat question but I have trawled the net for a specific answer and can't find one so here goes...

I currently have a repayment mortgage with natwest and have recently decided to regain control of my money... so after reading about front loading of interest on mortgages, I figured (as I'm not going to be living in my current home for many more years and I have an extension to build) it would be better for me to be on an interest-only mortgage and put the remainder of my current monthly payments into a savings account.

Does anyone know if natwest will allow a change over from repayment to interest-only during a fixed rate deal (which expires in April '13 btw) or even if they will allow it at all with a LTV of 75%?

Thanks, Matt

dimbo61

Highly unlikely Matt as many lenders are pulling out of IO mortgages.

_Andy_

If you want a specific answer you need to ring them and ask.

opinions4u

matthewr wrote: »

I currently have a repayment mortgage with natwest and have recently decided to regain control of my money... so after reading about front loading of interest on mortgages, I figured (as I'm not going to be living in my current home for many more years and I have an extension to build) it would be better for me to be on an interest-only mortgage and put the remainder of my current monthly payments into a savings account.

What have you actually read about front loading of interest?

If your mortgage rate is higher than the net savings rate then what you're proposing will mean you get charged more interest on the part of the mortgage debt that hasn't reduced than you will earn back on your savings.

- For example, a £100,000 mortgage at 4% will cost £4,000 a year.
- £2,000 in savings earning 2% net will earn you £40.
- Net cost of mortgage £3,960.

- £98,000 in mortgage at 4% will cost £3,920.
- Making you better off than the example above.

Does anyone know if natwest will allow a change over from repayment to interest-only during a fixed rate deal (which expires in April '13 btw) or even if they will allow it at all with a LTV of 75%?

They probably won't.

Wutang_2

I want to regain control of my financial affairs too - ergo, I am no longer prepared to pay any interest.How do I go about this please?

matthewr

Good point opinions4u! I hadn't really looked at it like that, I just found myself getting frustrated that I'm paying over £400 a month more than IO and have paid off very little of my mortgage since I took it out 18months ago.

Wutang - buy your house for cash mate, problem solved

michelle2008

Matthew - moving to interest only will not solve your frustration at the front loading of interest - surely it will make it worse?

I too hate the ealy years when the balance ramiains stubbornly high. I have responded by overpaying - which accelerates the ratio change between interest and capital - and saves me a fortune!

LawrenceAMN

Michael

When Nat West tell you the details of the savings vehicles you will need in place to be on an interest only contract you will realise you are better off staying as you are.

On a repayment mortgage the capital repaid in the early years may seem minimal. That is because your interest due is higher whilst your mortgage balance is higher. Your lender adjusts capital repaid each month over the full term of your contract to even out repayments. Otherwise your payments in the early years would be too high.

matthewr

i appreciate all the responses guys, will just stay as i am and hack away at it. Thanks for taking the time