Remortgage to interest only to extend.

r66bby

Hey guys.
Just got the keys to our new house this week. We are locked into our mortgage for 2 years. The house is a massive improvement on our last bungalow but it's right at our limits.
I'm just after some input really on extension plans.

In 2 years time remortgage to a interest only, making the payments lower. Then the difference in payments use to get a loan for a kitchen extension, as well as money that we would have saved. Once everything's done and the house value has increased, consolidate everything and go back to a repayment mortgage.

Does this sound ok?

amnblog

Possibly to you. Probably not to the regulator or the lenders.


What is your strategy to repay the capital and the end of the mortgage term if you go interest only?

r66bby

Only plan on going interest only for a couple of years.

csgohan4

Why not save up for the kitchen extension. It seem you have pushed yourself to the limit in affording this new house.


Have you worked the maths in how much you are paying extra if you went interest only?? over the term

AnotherJoe

r66bby wrote: »

In 2 years time remortgage to a interest only, making the payments lower. Then the difference in payments use to get a loan for a kitchen extension, as well as money that we would have saved. Once everything's done and the house value has increased, consolidate everything and go back to a repayment mortgage.

Does this sound ok?

No. it leaves you financially exposed, and also IO mortgages are much more difficult to get nowadays (and will likely be even more difficult in 2 years time) and they need to be associated with a repayment vehicle at the end if the term, which you won't have.

You seem to be planning to live beyond your means, or certainly at the edge. Suppose house prices fell and/or mortgage rates rise so that after the extension was done, it was not possible to get back to a repayment?

Neutrinno

r66bby wrote: »

Only plan on going interest only for a couple of years.

Do you actually have any plan in place to show the lender how you are going to pay off the capital? You will need something to prove, even if you only plan to change for a couple of years. Things like pensions, ISA's, stocks and shares etc

amnblog

r66bby wrote: »

Only plan on going interest only for a couple of years.

Not an option I'm afraid.


If cash flow for the higher lending on a capital repayment basis is likely to be an issue you can most likely get second charge lending through a broker to top up your current repayment mortgage.