Changing from interest only to repayment

beauty-queen

Hi all
As my username would suggest I'm pretty clued up on all things beauty, but not so great with mortgage stuff, so please forgive my ignorance!
I currently have a mortgage which for some reason is broken into 3 accounts; the reasons are lost in the mists of time...
2 of those sub accounts are repayment.
1 is interest only and this is one where I would like some advice please!

I have an endowment policy to pay off the capital and when checking it recently I noticed, with some horror that it is due to mature 5 years AFTER the end of the interest only part of the mortgage!

Obviously this is a tad worrying so I'm wondering how to deal with this.
One thought was to change that part of the mortgage to repayment. The monthly payments would be out of my price league just now so the only way I think I could do this would be to extend the term. In order to be able to afford the monthly repayments I would need to extend it from the current 3 years and 8 months, to 20 years.
Would there be another way to do this, do you think?

I was 50 on Wednesday - Happy Birthday to me, eh?!
My husband is 20 years younger than me - don't; it's like being married to Kevin The Teenager at times!

Any guidance would be most appreciated.
Thanks v much!

HappyMJ

You don't need to change it...just make overpayments or if the interest rate is very low save the money up in ISA's instead.

What is the interest rate on each component of the mortgage? Is it reasonable?

How much outstanding? What are the monthly repayments? What is the endowment policy premium? What's the endowment estimated to pay out?

You can make the term 20 years and once the endowment matures it'll pay off the majority of the mortgage and dramatically reduce the remaining term.

beauty-queen

Gosh, that was quick! Thank you so much for coming back to me!
The interest rate is the bank's standard variable rate at (ok, no shouting or sniggering at the back, please) 4.49%
I would like to reduce this, now there's a thing.
Details as follows:
A/C 1. Repayment - Amt Outstanding 30,200 - 7 years 8 months
A/C 2. Interest only - Amt Outstanding 35,700 - 3 years 8 months
A/C 3. Repayment - Amt Outstanding 4,800 - 3 years 8 months

Endowment policy premium £100.72 pcm - estimated to pay out minimum of £38k on 27 June 2022

amnblog

This doesn't sound right.

Speak to your lender to find out exactly where you stand and what your options are.

beauty-queen

Sorry, not sure what you mean by it not sounding right?
Which bit sounds wrong?
I'm not in a fixed rate or anything so I can change whatever I want at the moment; it's purely a question of how best to go about it!
Thanks

HappyMJ

beauty-queen wrote: »

Gosh, that was quick! Thank you so much for coming back to me!
The interest rate is the bank's standard variable rate at (ok, no shouting or sniggering at the back, please) 4.49%
I would like to reduce this, now there's a thing.
Details as follows:
A/C 1. Repayment - Amt Outstanding 30,200 - 7 years 8 months
A/C 2. Interest only - Amt Outstanding 35,700 - 3 years 8 months
A/C 3. Repayment - Amt Outstanding 4,800 - 3 years 8 months

Endowment policy premium £100.72 pcm - estimated to pay out minimum of £38k on 27 June 2022

Nothing wrong with 4.49%...that's fairly average.

Right so A/C 1 is going to repaid in full in 7yrs 8 mths that's fine...
A/C 3 is going to be repaid in full in 3 yrs 8 mths..that's fine...

A/C 2 will finish it's interest only in 3 yrs 8 mths then revert to repayment...but...with the A/C 3 payments added you should be able to meet them until the endowment policy matures in 8 yrs 10 mths which will clear the mortgage.

Nothing to worry about...they'll sort it and keep your repayments the same until the endowment matures. Based on your figures you will have an excess too which you could use for a holiday if you want.

If you really want you could remortgage...I don't think you would save much though. £70,700 total outstanding into a full repayment mortgage of 20 years would probably have higher monthly repayments than what you are paying now...as I think you've probably already worked out.

beauty-queen

Thank you SO much!
They've offered me a better rate though - 2 yr fixed at 3.49%. Surely it's a good idea to take that, no?

HappyMJ

beauty-queen wrote: »

Thank you SO much!
They've offered me a better rate though - 2 yr fixed at 3.49%. Surely it's a good idea to take that, no?

As long as it's fee free why not... If there are any fees you'll have to figure out if it's worth it. The interest rate difference is 1% so the fees need to be less than about £500 to be worth it. If they are higher forget it.

beauty-queen

Nope, it's all fee free!