am i trapped in my interest only mortgage now?

fastmower

Hi All,

We had an interest only (mainly) mortgage with Bank of Ireland. Approx 20k on repayment and 50k on interest only. Next thing we were with a company called the Mortgage Works. We just got changed over. It doesn't look like there is anything we can do about it. We had a 25 year mortgage, but have about 12 years left. The interest rate is quite high compared to other deals on the market, but I can't find a company with a better deal that will take us on. We do not want to cash our ISA's in as they are performing ok at the minute, but moving over to repayment, even on lower interest elsewhere would be bigger outgoings on a monthly basis. We also do not want to lengthen the term. Post office seems to offer it but only if you have £200k equity in your property. Our property value is approx £160k, so we have about £90k equity. Does anyone have any advice re changing our mortgage, or are we just stuck with it now?
Thanks in advance
Jo

pinkteapot

£90k equity and £70k mortgage required, roughly? So you're looking at less than 50% LTV.

What are your incomes? Presumably it's the incomes (or credit history problems) causing a problem with switching to a different company?

You said you don't want to lengthen the term, nor do you want to make higher monthly repayments. Unless you do one or the other, you can't move from interest only to a repayment mortgage! Why won't you consider these options?

Is downsizing to a cheaper house an option?

dimbo61

We know nothing about you!
Age, income, job, job security, credit history, location, kids ETC
Now you could wait another 12 years until you are close to retirement and then THINK OMG we still have £50K outstanding on the mortgage and HOPE the ISA,s have done well enough to clear the mortgage OR you take action now.
Number one plan for me has been get rid of the mortgage then I have a home for the rest of my life ( Which I could sell when I am very old!!) and no rent/mortgage to pay to anyone ( Therefore live cheaply in old age)
Interest rates have only one way to go!
Please go and see a whole of market mortgage broker ( Take copy of credit report from Experian , Equifax , checkmyfile) wage slips, mortgage statement to see how much you owe ETC
Please go onto repayment or look forward to selling home when you retire

fastmower

Hi Thanks for your responses.
The credit/income has not been a problem for switching mortgage. The problem was us trying to find a mortgage on the same terms forlower interest rates, that doesn't demand a high amount of equity in the house. Yes the LTV ratio is quite good, but it's not enough for the interest only lenders.

I work pt, husband works f/t. Joint income approx 30£k, North Lancashire. We have 2 kids, ages 9 and 12. My Husband is 49 and I am 38. This is why we don't want to lengthen the term.

Is most peoples' opinions to get out of interest only and get on repayment and just stomach the higher monthly outgoings? The ISAs have been running for the past 13 years and I thought they would make more the further down the term we go which is what is making me think about staying on interest only.
Icould cash the ISA in and reduce the mortgage with this lump sum...but it would still be higher monthly outgoings. It is such a minefield, and it is a scary thought that we could make wrong decision.

hcb42

you need to up your outgoings to pay off the mortgage.

Otherwise you cannot pay off the £50K you currently owe.

Just remortgage, onto a repayment mortgage for 12 years or whatever your term is. This would be about £588 assuming a 3.25% rate was achieved.

If this is breaking the budget a little, you might be able to reduce the amount you save into the ISA a little, income will no doubt rise in the next 12 years, and the ISAs will grow anyway, giving you a lift into retirement (which is nearly 20 years away)

dimbo61

Your husband is 49 and if you take a 3% five year fix over 15 years taking him to 65 you would pay about £350 a month.
This is without cashing in the ISA,s
It is easy to say increase your income but I hope you can afford £350 a month. Fix for 5 years and overpay if you can
Good Luck

Oli.s

If you stay interest only how are you planning on paying off the mortgage in 12 years?

Morgage_Confused

You know you can just overpay the interest only part of the mortgage so its like a "diy" repayment mortgage. So you dont even need to remortgage anywhere.

JimmyTheWig

fastmower wrote: »

We also do not want to lengthen the term.

Presumably the current plan is to be interest-only for the next 12 years and then use the ISAs to pay off the balance?
You could increase the term of the mortgage (as long as your husband's job is one where it is possible to work over the age of 60) on a repayment basis. Then, for example, in 12 years your mortgage balance would be half what it is now. You could use the ISAs at that point in time to clear the full balance and so it would still be done and dusted in 12 years time.

Although, when you say...

fastmower wrote: »

Icould cash the ISA in and reduce the mortgage with this lump sum...but it would still be higher monthly outgoings.

are you accounting for the money that you currently pay into the ISA each month which you could put towards the mortgage each month? (Assuming that you do pay into the ISA each month?)
If you are taking that into account then you are either (a) not paying enough to clear your mortgage in 12 years time or (b) assuming that the growth on your ISA will, over the next 12 years, outstrip the interest rate of your mortgage which is far from guaranteed. In which case you have a problem.