Interest only mortgage

Doppit

Hello everyone, this is my first ever post so here goes. All advise gratefully received.

I am a single parent (37yrs) with an £80,000 interest only mortgage (due to financial constraints) and a present income of approx £16,000 pa. I have no other debts, savings of approx £4500 in a cash ISA but no pension or means of repaying mortgage at the end of term at present (21yrs left to go)

I have just had the property valued and believe I have approx £110,000 equity. Here is where my confusion starts (putting aside personal reasons for wanting to move) please could anyone give me advise on what my next best financial move should be.

Is it best to make this equity work for me by investing into a higher value property & also increase my mortgage further or should I be concentrating on repaying the capital (either by changing to repyament mortgage or making overpayments) or selling and buying a cheaper property to decrease the motgage. Please help very confused and have no one to talk this over with.

danlightbulb

If you decreased the mortgage by half to £40k then that means that you could buy a place worth around £145k. (£110k equity + £40k outstanding mortgage - £5k fees). This would probably allow you to go onto capital repayment on your mortgage and hence pay it off in maybe 20 - 25 years depending on what you can afford.

Presumably, from your figures, your house is worth £190k at present. What can £150k buy you in your area?

I'm sure the pro's on here will be able to offer some good advice for you.

Doppit

Thank you danlightbulb, am grateful for all ideas. 150k wouldn't get me much, as live in Dorset but I could definately afford repayment mortgage on £40k. So investment wise; you think it is better to reduce mortgage debt?

danlightbulb

Its a tough one doppit and really down to your personal preference.

It might not be a bad idea to release some of your equity and downsize in light of the current financial climate. I would consider it myself, but alot depends on the type of house you can downsize to and whether this is acceptable to you personally.

Without wanting to appear rude or disrespectful, given the size of your salary you might find it difficult to upsize given the fact that interest rates are rising. Additionally, as you are on an interest only mortgage with no endowment in place, this would be ringing a few alarm bells for me especially the older you get.

Hope this has helped you, but mine is only 1 of many opinions.