Repayment to Interest Only

Noobie2011

Hi All,

Looking for some advice. I have posted on here a couple of months ago around the bills I have and the main response was just keep paying them as you are and reducing them which I am doing and it is going fine but not leaving me much wiggle room in case of emergencies and also means paying the minimums on CC's which is not ideal.

So in terms of most of my bills the payment is what it is and cannot reduce that unless I stop paying it or look at something like a DMP etc which I do not want to do.

My other option is to change from a repayment to interest only on my Mortgage for few months to give me the extra money each month to dump into other debts and pay them off which should free up extra money on top to pay more off these etc. Then once done this I can change back to the repayment option and ideally should have enough money to make over payments to try and balance out the period where I was Interest only.

Now I have contacted my Mortgage provider who is Precise and they have asked that I ring them to go through this with them. In my terms is says there is a £60 charge for considering the switch so that tells me there is a possibility I could do this but would assume they have some criteria I need to meet even though the payments would be going down rather than up for a period of time.

I want to be totally honest with them and I am sure they can put 2 and 2 together and realize it must be money troubles if I am wanting to reduce my mortgage payment for a period. However I do not want to tell them the above about paying off other debts etc until I know this is something they would see as justification for going Interest only. Also some of the debt has been taken out after my Mortgage so also do not want to risk them saying I can no longer afford the Mortgage terms and therefore maybe cancelling my Mortgage or something as that would be a worse situation than i am in now.

Can anyone help in regards to what criteria you need to meet in order to move from repayment to interest only and also would the fact I want to do this so I can reduce other debt to release affordability and then move back to repayment be a valid reason for them

Thanks in advance of any help

kingstreet

Normally you need to demonstrate financial hardship.

Prioritising unsecured debt over keeping a roof over your head may not be viewed in a positive light by a lender.

You may wish to speak to a debt charity such as Step Change before you put this plan into action.

Noobie2011

kingstreet wrote: »

Normally you need to demonstrate financial hardship.

Prioritising unsecured debt over keeping a roof over your head may not be viewed in a positive light by a lender.

You may wish to speak to a debt charity such as Step Change before you put this plan into action.

Well at the moment we probably come out with between 100-150 month after everything but that usually because of different bill amounts that changes and end up dipping into CC's availability.

I agree reducing the secured debt pay off to pay unsecured is not ideal or sound good but for me it is the long term solution to be able to not default on any debts but at the same time releasing some money to enable me to make an impact on some of the debts and get rid of them which in turn will release more funds and eventually change back to repayment and make overpayments

maninthestreet

Pleading poverty to your mortgage lender may not get the outcome you are hoping for. How much unsecured debt do you have?

WellKnownSid

Cut out everything you don't need. And I mean everything... Fill in an SOA - it's not about not getting the rewards you deserve which I think you've mentioned previously - it's doing everything possible to channel all possible cash into CCs etc. You'll get far more back in the long run.

The trouble with paying the minimums on CCs is that you may only be paying off a few pence every month. I did this exercise with a friend of mine a couple of years ago with a store card. She thought the debt would be cleared in a couple of years tops - we worked out it would be 125 years... In effect they are already "interest only".

The concern everyone will have on here is that life never goes to plan. Switching to interest only on the mortgage for a period could easily coincide with the need for a new washing machine - the net affect will likely be a slightly bigger hole than before... And potentially fewer options.

An SOA would be a good start...

Noobie2011

maninthestreet wrote: »

Pleading poverty to your mortgage lender may not get the outcome you are hoping for. How much unsecured debt do you have?

That is my worry, if it is a case of i plead my case and they say no and leave it there then not ideal but fine. But is there a risk if I divulge this debt to them, some of which was taken out after the Mortgage which includes the 2nd charge loan could they do me for breach of the Mortgage or the fact they deem I cant afford it anymore and then cancel my Mortgage etc?

Debts below, only secured is the 2nd charge

118118 Money Loan: £5,614 Remaining
Monthly Payment: 255.17
Last Payment: May 2017

DFS Furniture: £2,466.56 Remaining
Monthly Payment: £60.16
Last Payment: Dec 2018

Fashionworld: £2500 Remaining
Monthly Min Payment: £140

Car Loan: £14,623
Monthly Payment: £250
Last Payment: May 2020

2nd Mortgage Charge: £16,500
Monthly Payment: £385
Last Payment: May 2019

Card Limit and rough Min Payment
Barclaycard £1,200.00 - £65.00
VANQUIS BANK £500.00 - £25.12
VANQUIS BANK £2,000.00 - £85
Ocean £1,000.00 - £46.00
CREDIT CARD £650.00 - £41.40
CAPITAL ONE £2,550.00 - £98.09
BARCLAYCARD £1,200.00 - £60.96
CAPITAL ONE £200.00 - £5.81
Barclaycard IHG £5,000.00 - £123.00

My thinking is with the extra money from changing to Interest Only I could afford to quickly pay off some credit cards freeing up more money and then move onto the bigger debts. Then once I had enough available every month I could switch back to repayment but still knowing I have enough extra income free for emergencies and to survive the month

Noobie2011

WellKnownSid wrote: »

Cut out everything you don't need. And I mean everything... Fill in an SOA - it's not about not getting the rewards you deserve which I think you've mentioned previously - it's doing everything possible to channel all possible cash into CCs etc. You'll get far more back in the long run.

The trouble with paying the minimums on CCs is that you may only be paying off a few pence every month. I did this exercise with a friend of mine a couple of years ago with a store card. She thought the debt would be cleared in a couple of years tops - we worked out it would be 125 years... In effect they are already "interest only".

The concern everyone will have on here is that life never goes to plan. Switching to interest only on the mortgage for a period could easily coincide with the need for a new washing machine - the net affect will likely be a slightly bigger hole than before... And potentially fewer options.

An SOA would be a good start...

I get where you are coming from and yes I could end up for whatever reason having to use the extra money that was going to go to CC's on a washing machine or car bill etc. But then on the other hand you cannot think like that as would never try and make changes to better your situation. Plus the reasoning behind this is if I had an emergency now I would be worse off as no spare cash to sort it unless I stopped paying a debt which is not where I want to be as out of my control.

I have gone through everything and cut it to a bear minimum. All my bills now are essentials such as utility, insurance kind of bills etc. I have cut my food and petrol to bare minimum without being stupid or unrealistic also. The only luxury I had was sky and have rang sky and cancelled so there is nothing left to trim really.

Thing might happen but I can only go off things staying as they are which means if an emergency happens in any month going forward I am in trouble. So until that happens I feel I need to put measures in place to cover that. It may not be ideal to take the repayment side out of mortgage but if my plan works then it will reduce the unsecured debt which and in turn reduce the risk of me defaulting on my secured debt such as Mortgage.

Noobie2011

I may not go ahead with the plan or may not be accepted by Precise but wanting to clarify by me talking to them and being honest I am not going to risk my current Mortgage deal especially if i admit to the 2nd Charge which they dont know about

ViolaLass

Given how relatively small your second charge is, changing it to IO would not give you much to throw at your relatively huge other debts.

Selling your car and picking up another one for £1k would save you a lot more, for example.

Noobie2011

ViolaLass wrote: »

Given how relatively small your second charge is, changing it to IO would not give you much to throw at your relatively huge other debts.

Selling your car and picking up another one for £1k would save you a lot more, for example.

Not sure I get you with the second charge to IO as I am looking at changing my main Mortgage to IO and not the 2nd charge unless i don't understand your response

The car is on finance and only had it 6/7 months so cannot sell it

WellKnownSid

Noobie2011 wrote: »

It may not be ideal to take the repayment side out of mortgage but if my plan works then it will reduce the unsecured debt which and in turn reduce the risk of me defaulting on my secured debt such as Mortgage.

By my calculation that's almost £40,000 of unsecured debt - plus £16,500 on a second charge. £1,640 of contracted monthly payments, excluding the mortgage but including the second charge.

With £12,500 on credit cards - that's £550 ish. Even if you could double that it to £1100 it could take you close to two years to pay them off. It's not going to happen in a 'few months'.

Taking an interest-only option at this point is simply moving the deck chairs around - I cannot see it having enough of an impact, only increase the risk.