Changing to interest only - ERC?

PM321

Hoping for little more advice please.

We are looking at ways to reduce monthly outgoings and consider looking into interest only for the mortgage.  We have a LOT of higher interest debt that really needs attention.

I’ve had a look at the criteria for interest only with Halifax, our current lender.  It seems to be a possibility.  Our repayment vehicle would be the sale of our home in 20 years (it’s always been the plan to downsize once the kids have flown the nest).   Current LTV of 65% with just over £320k equity.

However we did a Halifax product transfer in January, fixing for 5 years.  Is moving onto interest-only considered as another product switch wrt the early repayment charges?

Thanks

Edi81

I can’t really help but have seen your other post which has other pertinent details about your situation. 

Interest only mortgages I believe are very much income dependent these days. 

You may be better of posting on the dealing with debt board. 

K_S

PM321 said:

Hoping for little more advice please.

We are looking at ways to reduce monthly outgoings and consider looking into interest only for the mortgage.  We have a LOT of higher interest debt that really needs attention.

I’ve had a look at the criteria for interest only with Halifax, our current lender.  It seems to be a possibility.  Our repayment vehicle would be the sale of our home in 20 years (it’s always been the plan to downsize once the kids have flown the nest).   Current LTV of 65% with just over £320k equity.

However we did a Halifax product transfer in January, fixing for 5 years.  Is moving onto interest-only considered as another product switch wrt the early repayment charges?

Thanks

@pm321 For Halifax, if you want to use downsizing as a repayment vehicle you need equity of £200k+ (which you seem to have), no more than 50% LTV and sole/joint income of 100k/150k+.

Generally speaking, even if you were to consider moving lenders to a full interest-only mortgage, most will not let you go beyond 50% on LTV.

With a few specialist lenders, you may be able to go up to 60% LTV, but off of the top of my head I can't think of any who will go beyond that.

Another option is a part-and-part mortgage with (say) up to 50% on interest-only and the rest on capital-repayment.

In any case, generally speaking, you will need to meet affordability on a capital repayment basis to qualify for interest-only.

PM321

Many thanks for the replies.  

Yes my other thread is hopefully just a temporary issue of reduced pay.  We can dip into our (limited) savings to keep the mortgage repayments going until pay goes back up.  

K_S thanks for the extra info.  Yes we have the equity, and under normal circumstances we’d have the income and affordability.  Hopefully once back on full pay we might be able to look at part-and-part interest only

Thrugelmir

PM321 said:

  We have a LOT of higher interest debt that really needs attention.

Then mainstream lenders are unlikely to agree to an interest only basis. Perhaps time to consider your long term plans. Downsizing and reducing the size of your mortgage whilst remaining on a repayment basis. Lenders have a duty of care and would more than likely support your application. If you were to present your plan in a transparent manner , i.e. warts and all. . 

getmore4less

PM321 said:

Hoping for little more advice please.

We are looking at ways to reduce monthly outgoings and consider looking into interest only for the mortgage.  We have a LOT of higher interest debt that really needs attention.

I’ve had a look at the criteria for interest only with Halifax, our current lender.  It seems to be a possibility.  Our repayment vehicle would be the sale of our home in 20 years (it’s always been the plan to downsize once the kids have flown the nest).   Current LTV of 65% with just over £320k equity.

However we did a Halifax product transfer in January, fixing for 5 years.  Is moving onto interest-only considered as another product switch wrt the early repayment charges?

Thanks

https://forums.moneysavingexpert.com/discussion/6261331/payments-made-during-covid-payment-holiday-classed-as-overpayments#latest

I have a mortgage with Halifax with a monthly repayment of £1600.  I took a 3 month COVID payment holiday in June-August last year.  But during those months I was still able to make varying payments of about £1000 per month, .  Back to full £1600 per month from September.
In January I also made an extra payment of £2000.

Why did you not use that £5000  to address some of that high interest  debt rather than overpaying the the mortgage on a low rate?


What you want to do by going IO is consolidate your debts onto your mortgage going from unsecured to secured.


65% LTV with £320k equity is a ~£600k mortgage 

What term is that on because 20y  would be  £2,500 pm at 0% 

You said you payment was £1,600 last year that would be 40years at 1.3%  little room to extend the term. 


Big mortgage on a long term, high interests debt, little saving even though there was a big income coming in.


Looks like a debtfreewanabe  would be a better place to get your finances in order and look at your  options.

PM321

Sorry I rounded a little in my original post.

House value estimated at £855k
mortgage stands at £537k
remaining term is 33 years
Joint mortgage, both 35 years of age.  

Previous combined income £145k, but we’ve dropped to about £80k in last 12 months.  Fingers crossed we will be back to full pay by end of summer.

I think you’re right, having now had a look at debt free wannabe forum, I think I should be looking there.  But thanks again to all here for the replies.

getmore4less

Even with £80k  ~£4k+ net there should be enough to cover the payments unless some serious haemorrhaging of money going on

Having a good sort out should have you paying of the debts quite quickly once income goes back up.
Might even be some 0% CC deals about to help.get the rates down


With that sort of income(£7k+) pensions are on the priority list over paying down the mortgage(once debt cleared).


The Mortgage still looks off unless you got a very good rate at your last fix over 60% LTV 
 £537k/(33*12)= £1,356  1.5% £1,720