Switching to interest-only: does that affect credit?

kattynel123

I'm currently in a position where I am struggling to pay for everything I need to each month. Thinking of various solutions, I rang Woolwich to enquire if I could temporarily switch from a repayment mortgage to interest-only.

The answer that I basically received was that this would be a possibility however, it would badly affect my credit rating. Does this sound right to you all? In the long run I will be paying more so I can't comprehend why this should reflect badly on my credit.
Feeling confused and a little desperate... please help if you can : )

vacheron

Just a guess, but they may be saying that you "could" arrange to pay them less than you contractually agreed each month (after all, less is better than nothing), however that would begin to build up a deficit amount over the months compared to where your mortgage balance should have been at that time, and their systems would automatically report that deficit, (arrears), (default), or whatever they want to call it, to the credit reference agencies each month?

Senior_Paper_Monitor

Mortgage holidays and reductions to interest only are regularly reported as 'AR' - and bang goes your credit rating (good on the bank rep fessing up to that - rarely happens and many clients are shocked to find the impact)

amnblog

Ask them about other options that will not affect your credit rating.

kattynel123

thanks for your feedback all... To be fair amnblog this is what the advisor told me to do, but that i would need to speak to the sales team. I got their number but after spending 40 mins of my lunch hour on the phone, thought i would be best trying back another day : )

Thrugelmir

kattynel123 wrote: »

n the long run I will be paying more so I can't comprehend why this should reflect badly on my credit.

Reducing outgoings may be the answer but it's not the solution.

Whatever your financial issues. Paying back more over the longer term isn't ideal.

kattynel123

I appreciate what you are saying Thrugelmir
,if this option was a possibility i only wanted to take it up for a few months. After a series of unfortunate events, my finances are struggling, on a 'normal' month i should be ok... Just really wanted to build up some reserves and rely less on my overdraft. Thanks : )

shop-to-drop

Could you extend the term instead perhaps?

amnblog

Not if it takes 40 mins every lunch hour.

You should try the brokers lines currently where longer waits are common.

Thrugelmir

kattynel123 wrote: »

I appreciate what you are saying Thrugelmir
,if this option was a possibility i only wanted to take it up for a few months. After a series of unfortunate events, my finances are struggling, on a 'normal' month i should be ok... Just really wanted to build up some reserves and rely less on my overdraft. Thanks : )

Something that the mortgage lenders will be looking for. Their attitude will be why should we take the risk.

Pop over to the Debt Free wannabe board. Plenty of advice and support on there. With many people in similar predicaments.

kattynel123

Thanks Thrugelmir... will definitely have a look : )