Interest Only ?

Limited111

Hoping someone can help me out with some much needed advice. I currently have a outstanding mortgage of £93,000. I've had this mortgage for 16yrs & have always been up to date on monthly payments. The current value of my house is around £220/230,000 so there is good equity in it. A few months a go I was made redundant, no redundancy as it was a fairly new job. I live in N.Ireland and the job market isn't good at all. I'm also in my early 50s & believe this is also a hindrance in applications.

So far I have missed 2 mortgage payments. I had a long discussion with my provider - Santander. My wish was to start an interest only mortgage where I assured them I could meet those payments, but I definitely can't meet the repayment. They said they do not do interest only mortgages & it is not an option. We have agreed on a 6 month reduced payment which is doable (about the same rate as an interest only would be) After 6 months if we couldn't meet full payments they will be passing it to their solocitors.

It's also becoming clear that even if I do manage to get a job it will be no where near the salary I was on before, so payments will still be a problem. Even though there is equity it isn't enough to buy another property outright.

What I'm hoping to get advice on is - is it possible (or likely) to switch to another lender & get an interest only package. In 6 mths time what happens when Santander gets solicitors invoved, eg if we are taken to court is it possible for them to allow us to stay in our home if we guarantee the interest payments will be met ? In 5yrs time I will have an insurance policy that we enable me to pay off the mortgage in full, if that is of any help.

I live with my wife, who is disabled, does not work but on full disability payments, also 3 young adult children, over 18 & full time students.

Thank you.

Westminster

A tricky situation.

I would be impressed if there is a viable interest only option - get yourself a whole market broker and discuss it with them.

In your situation I would be putting the house on the market tomorrow to maximize your sale price rather than ending up with a full-blown 'distressed' sale.

That way you are in control of the situation, will clear the mortgage, have no trouble with rental deposit and can keep the rest of your equity in standby for when your situation improves (job wise etc) and can get yourself back in to home ownership in the future if that is your aim.

Do everything you can to avoid repossession as you will be asked about this on any future mortgage application.

Limited111

Thank you for your reply.

I get what you're saying about selling now but that really is my last resort as the rental will very quickly eat into any equity but I do understand. What I was hoping was perhaps someone who has been in this situation or knows what happens if you are taken to court, is there a possibility of the court saying, these people are prepared to pay their interest payments so they can't have their home repossessed while making those payments, or is that just wishful thinking on my part. Do courts not take the route of trying every possible way of not letting people lose their home ?

Westminster

How much difference is there in your area between rent and the interest only payments on your mortgage?

As it goes, I do have very similar experience (disabled wife, was self employed, had to stop work to be full time carer for 2 yeas so just had careers allowance / income support / her DLA & IB). Fortunately we were already interest only and the ISMI (now SMI) was better than it is now I believe.

We never went to court so can't offer any input on that front. What I can assure you of though is that you will sleep much more soundly once you start to tackle your situation head on. I had 67k insecured debt by the time I had my 'lightbulb moment' - we entered a DMP as that suited out situation.

Get yourself down to CAB or contact National Debtline / Stepchange to discuss it as they may have some additional suggestions.

Do bear in mind that if Santander do take you to court, you will be liable for their legal costs etc.

Thrugelmir

Look to downsize. Lenders are now very tightly regulated so they won't play games. If the current mortgage is only just about doable. Then you've no ability to withstand further financial distress. See if Santander are more flexible if you suggest this route.

Alternatively if you cashed in the policy now that would reduce your debt. Also free up more money to repay the mortgage with, i.e. no premiums to pay.

Limited111

Thank you.

There is a difference of about £350pm between interest only & rent (the rent being the higher) There isn't enough equity to downsize, if we could we would ! It will be 2 yrs before we can cash in enough from the policy so it's that amount of time we need to hang on to our property.

Again, sorry if I'm repeating but does anyone think it possible for a court to allow (if that's the term) a family to stay in their home while maintaining the interest payments, with good equity in the house & a means of paying off the mortgage in a couple of years ? It doesn't seem fair that the lender, who WILL get their money is able to just repossess without going down all alternative routes. I know fairness isn't their business, but still. Why are interest only mortgages no longer available especially at this stage ?

csgohan4

Interest only are only meant in theory for those with payment vehicles. You have none. It is also only temporary and you said so yourself you will unlikely get the same wage to meet the repayment demands, so all the more reason not to offer you interest.


Interest only are now not common to find due to the Mortgage rules and rightly so, for residential purposes


At the end of the day it's nothing personal, it's business.


The bank is trying to work with you and even if it went to court the lender is showing ways to work with you.


It is best to sort this out under your terms than under a repo order.

Downsize may not be an option you say, it may be the only option for you or Repo later down the line, so it's either won't or will, it's a choice.


As others have said Citizens advice bureaux is a good place to start.

Caz3121

csgohan4 wrote: »

Interest only are only meant in theory for those with payment vehicles. You have none.

Limited111 wrote: »

In 5yrs time I will have an insurance policy that we enable me to pay off the mortgage in full, if that is of any help.

It sounds like there is a repayment vehicle

OP have you looked to see if you qualify for SMI?
https://www.nidirect.gov.uk/articles/getting-help-make-your-mortgage-interest-payments

Limited111

Thank you all for your help, it is appreciated.

So far I haven't looked at SMI. I have no problem paying the interest only payments, not now & especially not if/when I get work. My wife gets high rate disability benefits & RSS support plus our children have small part time work along with their Uni courses.
From looking at SMI, not in great detail yet, it appears that can be paid for up to 2yrs. How does that work then if the lender says they don't do interest only ? Can the lender really repossess your homeif you maintain a monthly payment be it at a reduced amount plus you can show means of paying off the whole amount in 2yrs ?.

Yes, I will now arrange to meet someone who can advise but Santander seemed quite adamant if after 6mths if you can't pay full payment mortgage it's straight to solicitor.

Thank you.

Limited111

Sorry, that should be ESA support, auto spell on phone.

Westminster

If you can't meet your contracted payments then yes they can apply for repossession - whether it is granted probably comes down to the efforts you have made (and can demonstrate) to make up any arrears and are likely to get back on track etc.

Any payment arrangement is always going to be short term.

Sounds like you already missed two payments, and even if they do agree to 6 months reduced payments, the difference between your agreement and the contracted payment is being rolled up and added on top of the mortgage (and accruing interest etc) so it is not sustainable.