Interest only expires in 8 years, no method to pay it off

stevekent71

Hi

I have an interest only mortgage with Santander for £145,000, which expires in 8 years. Some time ago I cashed in the the endowment policy I had, which is a long story but down to illness and not being able to work for a while.

I've been putting this on the back-burner, as I also built up a large amount of debt, which I've finally paid off. This gives me about £400-£500 per month that I was using to pay off debt, to go towards the mortgage.

My thinking is that I should remortgage, getting a repayment mortgage and setting a 20 year term (I'm currently 48), which I imagine will soak up that £400 per month I have available.

Does this sound reasonable and sensible?

My second major issue is that I have a frozen pension with around £60k in it, and no further pension provision. I really want to be putting £500 per month into a pension to stand any chance of having a reasonably sized pot, but finances mean that I can't do this and pay off the mortgage too.

I'm feeling like my finances are in really poor shape, with the mistakes I made in my 30's becoming all too real. Tough to see any way I can address both the mortgage and the pension, and it's an increasing worry and concern.

I've thought about going to see a good IFA, but honesty I'd be pretty embarrassed about the state of where I'm at.

Any thoughts, ideas or recommendations would be most welcome.

Best
Steve

Brodiebobs

Have a play with the over payment calculator on here.

I'm assuming IO mortgage is a variable rate which is quite low at the moment, so it maybe beneficial to just make payments to pay down the balance if there are no penalties rather than remortgaging. You'd make a considerable dent with £500pm.

stevekent71

Yes, currently on standard variable rate. I'll hunt down the overpayment calculator, thanks. I'd still have an outstanding balance in 8 years time I would imagine though, although perhaps it would make more sense to remortgage at that time?

foxy-stoat

If you plan to sell your property in 8 years and down value, you should inject the £500 into your pension. If your end game is to try and be mortgage free then pay the £500 into your mortgage.

In 8 years you will be down to £97,000 on your mortgage so you can try for a repayment then or see if your current lender can put you onto a repayment type now - you may not get 20 years though. I was only able to get a 21 year mortgage and I am 44 and I have just remortgaged, but I didnt try past my existing lender.

Thrugelmir

Start by paying down the existing mortgage. You've plenty of time to consider your longer term options. Security of somewhere to live should be your top priority.

Jmaho

If you are on svr I imagine you are paying around 500 a month currently on an IO basis? You should be able to remortgage and put on a repayment basis over 20 years for around 200 a month more than you are currently paying. This is assuming you meet the criteria of standard high Street lenders. Lending to age 68 won't be a problem. Then put the additional 200 to 300 a month towards your pension. Then mortgage will be fully repaid by age 68 and pension will be higher also

stevekent71

Thanks everyone.

I'm on SVR and paying £600/month currently, and looking at the repayment calculator, switching to repayment would take it up to the £800's, which is fine.

I'll reach out to my existing provider (Santander) to see what they can offer. I'll also do some research at alternate options and switching provider.

[Deleted User]

stevekent71 wrote: »

I'll reach out to my existing provider (Santander) to see what they can offer.

Hopefully they'll be there, to love and to comfort you.

enthusiasticsaver

Why are you on SVR? Can you not get a decent fixed rate deal which is lower? I agree that converting the mortgage to repayment is sensible and luckily you still have time to do that. Also look to overpay your pension. Have you not got a pension with your current workplace which is not frozen?

dimbo61

Consider a 5 year fix it you have a good LTV as rates are very good at the moment.
If you have a pension with your current employer can you increase how much you pay in every month and get extra from your employer as well and government tax relief on top ?

ACG

IS the SVR circa 4-5% or is it a base rate tracker at maybe 1-2%?
If it is the higher rate, you can probably get a 5 year fixed rate on repayment for well under what you expect to pay. It may leave you some money to pay in to a pension, but probably not the amount you are after.