Interest only mortgage question

Beanie_three

Have had interest only mortage for a while now. Husband started new business, I completed teaching qualification , worked part time for 9 years and had three children. A few months ago we were going to change to repayment which would have involved paying a 70.00 admin fee. Our fixed term comes to an end in September so thought we would just do it then. Anyway with the new rules we are beinv told that we have to go through affordability checks with same lender to change to capital.
We have never missed a mortgage payment in 12 years. Out mort is 165000 on house value of around 280000.
I am going to increase my hours from sept nearly doubling and my husbands business is just showing better income however we still will only be showing about 40-45000pa income. My husband has 8000 on credit card and I have a loan. Credit rating 'excellent' according to experian. I still don't think that we will pass affordability check.
Anybody been through anything similar and got any advice. Thank you in advance.
If typos it is 1am but can't sleep cause worrying.

Beanie_three

Midnight not 1am

haras_nosirrah

Why don't you just stay interest only and overpay assuming your lender allows this

Thrugelmir

Tackle your credit card debts first. Also spring clean your finances to find savings. As a £165k debt is a sizable mountain to shift. With interest rates rises on the horizon certainly won't get any easier in the future to repay.

Jenniefour

Thrugelmir wrote: »

Tackle your credit card debts first. Also spring clean your finances to find savings. As a £165k debt is a sizable mountain to shift. With interest rates rises on the horizon certainly won't get any easier in the future to repay.

Agree. Think about posting on debt free board to get some help with paying down credit card debt and loan, where you could make savings on expenditure etc. Likely that interest rates on credit card debt and loan is higher than interest rate on your mortgage anyway. Once debt is dealt with then you can consider what to do about mortgage. As haras_nosirrah said you may not need to change your mortgage if you are allowed to overpay.

GingerBob_3

Beanie_three wrote: »

Have had interest only mortage for a while now. Husband started new business, I completed teaching qualification , worked part time for 9 years and had three children. A few months ago we were going to change to repayment which would have involved paying a 70.00 admin fee. Our fixed term comes to an end in September so thought we would just do it then. Anyway with the new rules we are beinv told that we have to go through affordability checks with same lender to change to capital.
We have never missed a mortgage payment in 12 years. Out mort is 165000 on house value of around 280000.
I am going to increase my hours from sept nearly doubling and my husbands business is just showing better income however we still will only be showing about 40-45000pa income. My husband has 8000 on credit card and I have a loan. Credit rating 'excellent' according to experian. I still don't think that we will pass affordability check.
Anybody been through anything similar and got any advice. Thank you in advance.
If typos it is 1am but can't sleep cause worrying.

I'm wondering why there's an affordability check (i.e. an onerous examination of your finances down to the most minute detail) when you're not borrowing any additional money. Also, capital repayment, is a safer bet for the lender - reduces the chance of shortfall at end of term.

The last letter I had from my mortgage provider said something along the lines of "if your plan is not on target we may require you to go on to repayment for all or part of the loan".

Beany_three

Had to register as wasnt letting me on.
Thank you everyone for your replies.
I agree that we need to sort credit cards which we are in process of doing.
Like I say out circumstances are changing a lot of next few months. I will be earning 10000 a year more and my youngest son will get a free nursery place in jan saving us about 240 a month.
It's just so infuriating that they are saying interst only mortgages bad and they are making it hard for us to capital. Like I say we have never missed a mortgage payment and wee paying a higher rate a few years ago.
Our other option is to fix interest only again and just overpay.
Was hoping they might relax rules. I can totau understand why they would do it if we wanted more money.

Annisele

Are there any penalties for overpayment? If not, then you might as well stay on interest only and overpay. If you're prepared to do the calculations, you can make sure you always pay the amount you would've had to pay if your mortgage was on a repayment basis.

Beany_three

Yeah we can overpay 10 %. I agree and I have spoken to mort company about fixing it on interst only. My dh is not happy about it though and wants to go capital properly.
Thank you again for advice.

Smi1er

OK. Here goes.


You have the following debts: Credit card, Loan, Mortgage. I suspect the amount of interest (as in % rates) is also in the same order, therefore that's the order you should pay them off in.


You say you will shortly be saving paying out £240 pm when your youngest goes to nursery, so instead of putting this in the family budget use it to service your debt.


In addition the extra £10K pa.... personally I wouldn't use it to give me a better standard of living, instead I would use all of it to pay off the credit card, then the loan. (Make sure you can overpay the loan).


Once those are sorted you can then look at the mortgage. If you're happy with the terms of the mortgage then I would simply overpay. Look at other ways also, for example I have two First Direct regular savings accounts maxed @ £300pm paying 6%. After 12 months they mature and I use the proceeds to immediately pay off part of the mortgage. However, if you do this then you must be disciplined enough not to use the money for something else.

Beany_three

Thank you.
That is my intention any extra money earning and saving is going to blitz the debt.
I will look into the first direct accounts aswell. I agree it's discipline but its definetly worth it.