swapping to interest only

tracker_2

I'm thinking of changing over to IO for a short time to get myself back on track for a while with my finances, mortgage company ok with that but need something in place and a long term forecast, was thinking of an ISA but having difficulties getting companies to provide actual forecast, I currently owe £122,000 over 22yrs any suggestions would be great on how much I need to set aside and how much it will cover me for.. thanks:o

Kaz2904

According to the savings calculator at www.whatsthecost.com/savings.aspx you would have £124686.80 after 22 years of saving £260 a month at 5% apr (achievable at the moment with an isa). This does not factor in you losing your job or needing to claim benefits for any reason as these are means tested and if you have any savings your benefits will reduce or vanish.
Unless your mortgage will be significantly cheaper this way I wouldn't touch it with a barge pole, not over that length of time, sorry!

Your best plan of action could be to view it as a payment break of however long and use the saved money to clear all higher cost debts. Then work out what you should have paid back on your original plan and set to clearing the mortgage back to where it should be.

It sounds to me as though you have just realised that you have problem debts and are wanting to get out of them. If this is the case then I would strongly recommend that you go over to the debt free wannabee board and post an soa. You will benefit from free advice from lost of people who will help you trim your budget and your debt.
Good luck with this, Kaz.

jamesd

tracker, you can expect to earn between 7% and 12% long term by investing in a stocks and shares ISA. I suggest using 7% as a cautious value.

As your circumstances improve you should look to invest at least the difference between interest only and repayment mortgage amounts. With decent investment performance that should leave a surplus of around 25%.

As your circumstances improve further over time, try investing as much as you can, looking on your stocks and shares ISA as your early retirement investment pot. If you were able to invest 600 a month you'd end up with half a million in the ISA in 22 years if you achieved a 9% return. That's getting to be enough to both pay off the mortgage and retire at the same time.

getmore4less

tracker wrote: »

I'm thinking of changing over to IO for a short time to get myself back on track for a while with my finances, mortgage company ok with that but need something in place and a long term forecast, was thinking of an ISA but having difficulties getting companies to provide actual forecast, I currently owe £122,000 over 22yrs any suggestions would be great on how much I need to set aside and how much it will cover me for.. thanks:o

Why do you need to change to IO?

If it is for other debts then you should look at the bigger picture and include all your debts in a plan.

If it is genuinly a short time to "sort things out" then you just go back onto a repayment after that short time and the lender should be happy with that.

The amount you need to put away is about the same as you need for a repayment anyway unless you asume growth rates above the mortgage rate which introduces risk options.