Looking to remortgage — advice sought

bpk101

Hi,

My wife and I are looking to remortgage our house as our current 5 year fixed mortgage ends soon. We only had a 5% deposit when we bought the house so our monthly repayments have been slightly on the higher side.

We're expecting our first child in a couple of weeks and thought we might go interest only on our new mortgage which would make things a little easier on the pocket whilst we start a family.

Our options are 2, 3 or 5 years with the monthly payments getting higher the longer we opt in for (but still a lot less than what we're currently paying).

Apologies for the novice questions but...

– What would be an advisable period to opt in for given we don't know what interest rates are going to do?

– Are interest only mortgages fixed or variable or do lenders offer both?

– Is our plan to go interest only for 2, 3 or 5 years to free up some money whilst we start a family a good idea?

– Any other things to watch out for as we remortgage?

Thanks.

Mortgage_Adviser

From your post I am getting the impression that yoi believe the Interest only mortgage is an easy one to get whether reality is very different with this.


What is your loan to value? (Eg. Property value against the mortagge amount outstanding)


What is your interest only repayment strategy? Eg. where are you going to get the money in 25 years or so when the mortgage terms comes to an end and the bank will expect all the money paid back to them in one go?

MovingForwards

What's your income as I've seen a few IO mortgages and it's £75k+ a year required plus other criteria.

Due to the endowments fiasco IO mortgages are very strict.

bpk101

MovingForwards wrote: »

What's your income as I've seen a few IO mortgages and it's £75k+ a year required plus other criteria.

Combined income of approx £200k a year

bpk101

Mortgage_Adviser wrote: »

What is your loan to value? (Eg. Property value against the mortagge amount outstanding)

We purchased the house in 2014 for £416,000 and borrowed £390,000.

We renovated the house over the last 3 years (including kitchen extension and a loft extension, adding 2 more bedrooms and an additional bathroom) and it is now worth approx. £700,000.

GoingOn30

I don't think going interest only is a good idea and encourages living beyond your means.
If you want to keep the payments low then why don't keep the mortgage as repayment but extend the term during your next 2 or 3 year fix?
How old are you now? If you pause repaying your mortgaging for a number of years now then will you be looking at still having mortgage repayments into your mid-60s?

bpk101

GoingOn30 wrote: »

How old are you now? If you pause repaying your mortgaging for a number of years now then will you be looking at still having mortgage repayments into your mid-60s?

I'm 41 so yes, that is a risk to consider.

GoingOn30 wrote: »

If you want to keep the payments low then why don't keep the mortgage as repayment but extend the term during your next 2 or 3 year fix?

What do you mean by extend the term?

Durban

bpk101 wrote: »

I'm 41 so yes, that is a risk to consider.



What do you mean by extend the term?

Much better idea to extend the term.

Basically , when you remortgage , ask the lender to extend it by the maximum amount of years you can. So , if you have 20 on there now , extend to 30 if you are able to. Your repayments will be much lower but it will still be a repayment mortgage rather than interest only.

Interest only is a terrible idea for a residential property.

When finances are better and you remortgage again in a few years , reduce the term by as much as you can afford so that you will definitely have the mortgage paid off before you retire or better still , even sooner.

This will make it less tight in the leaner years.

As an aside , that is a very high income that you have that you need to be thinking about going interest only. Surely there are other things that you can try and cut back on.

bpk101

My OH is under the impression that extending the term beyond our current 25 years isn't possible due to my age. Would this be right?

Durban wrote: »

Interest only is a terrible idea for a residential property.

Why is this?

getmore4less

How much is the mortgage now?

With £200k funding things there must be some serious spending going on.

£10k a month before tax mitigation, just mitigation of high rate still excess of £6k pm

Mortgage 25 years £400k 3.5% £2kpm

bpk101

getmore4less wrote: »

With £200k funding things there must be some serious spending going on.

Paying off 4 years of home renovation loans mainly + the daily cost of living in London is not cheap.

Also my OH is about to go on a years maternity leave at a reduced wage with the view to going back part time for 6 months after (she is the higher earner) which is why we're looking to reduce our mortgage costs for some years.