Rochester mortgages, interest rate has risen to 7.14%, advice please

zAndy1

Hi,
   I have an interest only mortgage with Rochester mortgages , the interest rate has risen to 7.14% (LRR currently 3.44% + a margin of 3.44%). Outstanding mortgage is £164k, term left 10 years approx, property value £240k ish. Monthly payments increased to £980pm from just over £400pm earlier this year. I have a lot of debt (see seperate thread on debt free wannabee) so remortgaging at the moment is nigh on impossible. I'm nervous about remortgaging onto a repayment mortgage as monthly payments will increase obviously and if I ever get made redundant (I'm 55 now) we'd be in a very tricky position (well we are anyway let's face it...). Can take pension lump sum of £32k which would clear most of the credit card debt and leave one loan outstanding , nothing significant enough to affect a remortgage. No missed payments on mortgage or cards ever, combined income £85k ish, on the face of it apart from my age we're probably a mortgage lenders dream clients really and would be able to overpay a mortgage probably fairly significantly as well. So , do I take the tfls, pay off the cards and look to remortgage early next year and if so do I go for repayment or interest only and look to overpay it to effectively make it repayment without the contractual repayment monthly payment in case we hit difficult times. I believe you can remortgage up to the age of 70 without having to provide proof of retirement income is that correct generally? 

Cheers

tripled

There are interest only mortgages that allow overpayments - a quick search on MoneySuperMarket shows that. Have you spoken to a broker? They could look at your affordability and advise if there are any lenders likely to accept you and what the likely rates would be.

What makes you particularly worried about "difficult times"? If you had a repayment mortgage, could you focus on repaying your debts, building up a savings cushion, and leave your pension alone as a fallback if those "difficult times" materialise?

zAndy1

tripled said:

There are interest only mortgages that allow overpayments - a quick search on MoneySuperMarket shows that. Have you spoken to a broker? They could look at your affordability and advise if there are any lenders likely to accept you and what the likely rates would be.

What makes you particularly worried about "difficult times"? If you had a repayment mortgage, could you focus on repaying your debts, building up a savings cushion, and leave your pension alone as a fallback if those "difficult times" materialise?

I can make overpayments at the moment and there is no limit on how much I can overpay but the problem is the interest rate is so high at 7.14% we're paying a lot in interest that we could otherwise be using to reduce the capital. I wouldn't get a repayment mortgage with the current level of debt but we could easily get a repayment mortgage in Feb once the debts are paid off 

tripled

Has a broker has advised you that you're unlikely to get a repayment mortgage on a better rate, or is that an assumption? What about an interest only mortgage on better terms (there are interest only trackers with rates around half of what you are on now, depending on LTV)? Personally I would only consider drawing down the pension after exhausting other options.

zAndy1

Am I right in thinking that I could remortgage onto another interest only mortgage and as long as we aren't increasing our borrowing no affordability checks would need to be done if we haven't missed any payments? Presumably though they would want to know how we plan to pay off the mortgage at the end of the term which could be a tricky one to answer...