Remortgage or not, interest only or repayments?

kukoo

Hi all

I will really appreciate your advise.

House value: £230,000 - £240,000
Mortgage: £200,000 (Halifax)
Type: interest only
Fixed terms ended few months ago

We have a saving of £20,000 plus parents helping us with £30,000 that makes it £50,000 in total.

We want to pay the £50,000 towards our mortgage but scared if we changed to repayments and later not able to afford we can not go back to interest only. So will it work out the same if we stay on interest only for as long as we can and overpay as and when we save and some months if we cant afford we just pay the interest only.

Second question is shall we think of re-mortgaging or stay on the current Halifax SVR 3.9%? As all good rates are if you have 60%LTV.

Many thanks in advance.

kingstreet

Ask Halifax about its customer retention products, what they call product transfer deals.

See what's available as an alternative to standard rate.

As you have implied, remortgaging elsewhere will more than likely see you having to leave interest-only.

shortchanged_2

Do you have a repayment vehicle in place?

kukoo

Many thanks Kingstreet.

Hi Shortchanged, do you mean if we can afford/plans for repayments?

Well at present we both work and can manage to start repayment but I am thinking what if one loose a job or something else comes up than we might struggle hence I thought if we stay on interest only and overpay lumsum now and than which will decrease our mortgage.

For instance my interest only is £500 and repayment £1000. If i stay on interest only £500 and over pay £500 each month will this work out same as paying repayment £1000 each month.

Many thanks

Thrugelmir

Why do you need £20k in savings?

You are paying more interest on the mortgage than earning on your savings.

Why not just switch to a repayment mortgage now?

kukoo

I had lent £10,000 money to family for business start up which he returned few months ago and me my wife had £10,000 savings and since we thinking to whether put it towards mortgage or not etc...

We do want to start repayment as I explained above repayment is affordable at present but we worry, we still have a big mortgage left on the house and if something comes up or one of us loose a job than we cant go back to interest only hence I am thinking if we stay on interest only and overpay each month for instance:

"My interest only is £500 and repayment £1000. If i stay on interest only £500 and over pay £500 each month will this work out same as paying repayment £1000 each month."

R_P_W

What is your plan for paying the capital though?

kukoo

The plan is to stay on interest only and overpay each month for few years . After few years the capital will have reduced a little and than change to repayments.

I will appreciate if someone can answer:

"For instance, My interest only is £500 and repayment will be £1000. If i stay on interest only £500 and over pay £500 each month will this work out same as paying repayment £1000 each month."

redpete

kukoo wrote: »

"For instance, My interest only is £500 and repayment will be £1000. If i stay on interest only £500 and over pay £500 each month will this work out same as paying repayment £1000 each month."

Yes, if your lender allows you to overpay that much. Mine (Coop) allows 10% overpayment per year, any more than this incurs some charges.

The benefit of overpayment vs repayment mortgage is that you could draw on your overpayment fund if you need to in the future (depending on your lender's conditions) - but this is a last resort for us and not something I include in available funds.

Thrugelmir

kukoo wrote: »

The plan is to stay on interest only and overpay each month for few years . After few years the capital will have reduced a little and than change to repayments.

I will appreciate if someone can answer:

"For instance, My interest only is £500 and repayment will be £1000. If i stay on interest only £500 and over pay £500 each month will this work out same as paying repayment £1000 each month."

Will you repay your mortgage at a £1000 per month?

bigadaj

A repayment mortgage is designed to pay for a property over a set period. If you worry about affordability then fixed rate is the answer. If you are unlikely to afford a repayment mortgage then the answer is to buy a cheaper house, interest only really means you are renting from your bank and taking a gamble on house prices.