Going 'interest only' for a while to clear debt?

ferry

Just wanted to run this past you lot. An idea I had as an alternative way to clear some residual debt. Please pick holes in the plan, as always your feedback and guidance is valuable.

My current mortgage situation- house value around £475k / mortgage balance £100k / debts around 7k, terrible credit history but all payments to Santander completely up to date but a major is there are arrears on a 2nd charge..

I would ask my current mortgage provider, Santander, to transfer to an interest only deal for a maximum of 3 years based on meeting their criteria of having:  at least £250k equity /good LTV and affordability. Repayment vehicle will come in the from of the sale of the house when we plan to downsize in about 5 years.

Use the surplus, now around £300 per month to clear the debts. Once all clear return to Santander Capital Repayment payments and overpay more to make up for being on an interest only deal for that time.

Obviously, I may fall down on the first hurdle as Santander may not agree with this. I do not want to take out a consolidation loan.

As I say, just a thought.

Worst plan you’ve ever heard? and should I just take myself off to the DFW board?

housebuyer143

It appears you meet the criteria for IO with downsizing as your repayment strategy so it's probably a good idea, although they might not let you switch, you might need to take out a new product.

You don't need to switch back to repayment btw, you can just make overpayments to bring down the capital owed. 

Hoenir

ferry said:

 Repayment vehicle will come in the from of the sale of the house when we plan to downsize in about 5 years.

Why not downsize now? 

If affordability is not a problem. Then why not continue on your current path of paying down the debts. Budgeting properly and cutting out unneccessary expenditure. Santander might take the view that your proposed course of action doesn't resolve the underlying issue. 

ferry

Hoenir said:

ferry said:

 Repayment vehicle will come in the from of the sale of the house when we plan to downsize in about 5 years.

Why not downsize now? 

If affordability is not a problem. Then why not continue on your current path of paying down the debts. Budgeting properly and cutting out unneccessary expenditure. Santander might take the view that your proposed course of action doesn't resolve the underlying issue. 

We still have a young adult with us who's plan is to move out in around 5 years.