Repayment Holiday and Switching Mortgages

rich3101

Hi - in 2008 I borrowed £270k from the what was Northern Rock. I now want to switch providers however they told me to settle
I owe £281k approximately. I have take 5 repayment holidays during the period, and my monthly figures changed to accommodate this.

Can anyone advise why I now need to repay nearly £11k to switch providers?

amnblog

You owe Northern Rock £281,000? Is that not the long and short of it?

AnotherJoe

AFAIK during a repayment "holiday" interest continues to accumulate so I'd think its an extra £11k of interest.

Is this an interest only mortage? If not you've had some seriously extensive "holidays" !

rich3101

It is interest only. So do I need to repay back any payments that i missed as part of holidays taken? Still seems a lot? I assumed that they added the
Interest to balance and spread payments. If I knew that to switch mortgages o would need to repay all those holidays payments I wouldn't have done it.

They also won't give me a redemption figure unless I am paying it back.

Without the info I can't work out how much I need do save to switch mortgages

AnotherJoe

rich3101 wrote: »

It is interest only. So do I need to repay back any payments that i missed as part of holidays taken? Still seems a lot? I assumed that they added the
Interest to balance and spread payments. If I knew that to switch mortgages o would need to repay all those holidays payments I wouldn't have done it.

No, you need to pay the extra interest that accumulated whilst you weren't paying. Otherwise they are giving you money for free. By not paying back over those periods you extended the term and with an IO mortgage its very simple, every month you pay a fixed amount which keeps the balance exactly the same. You borrow £270k pay interest one year later you still owe £270k.

Say the interest is 4%. 4% of £270k is £10,800 so every year you have to pay £10,800 to stand still, still owing £270k.

If you put off paying it by a year overall as the effect of all those payment holidays, then you'd owe an extra £10,800, one years interest. If they didn't do that, then they'd effectively be lowering the interest rate.

rich3101 wrote: »

They also won't give me a redemption figure unless I am paying it back.

Without the info I can't work out how much I need do save to switch mortgages

I dont understand that. Surely any lender will provide a redemption figure if you ask? Currently for you it should be what you owe plus any early repayment charge (if there is one) plus probably an extra 99 quid or similar to close it.

Senior_Paper_Monitor

I would recommend you check how this shows on your credit report before making any plans, let alone applications.

'Holidays' can show many different ways, and potentially do a lot of damage.

Thrugelmir

rich3101 wrote: »

I have take 5 repayment holidays during the period,

In 7 years that's a lot. Suggests that your finances weren't in great shape. Which won't aid your ability to remortgage.