Interest only for 6 months. Revised payments afterwards seems to good to be true?

evosy1978

Hi all.

I'm 1 year into my 5 year fixed 20 year mortgage.
I've asked about going interest only for 6 months as I'm having some time off work.

I pay £590p/m atm
They said it would be £340p/m for 6 months interest only.

Then after 6 months it would increase to £595p/m

So for that decrease in total for 6 months it would only increase by £5 p/m for the rest of the mortgage... 

This seems really good?  Halving my payments for 6 months to only get an increase of a fiver afterwards... 

Am I looking at this correctly?

Thanks

Hoenir

Much will depend on the interest rate that you move onto at the end of the current fixed term. There's no guarantees as to what the monthly payment will be over the remaining 15 years of the mortgage. 

grumpy_codger

Over 6 months you underpaid (595-340)*6=1530 towards reducing the debt. And you have about 230 months left.
Possibly, my logic is flawed, but yes, even ignoring the interest, £5 seems to be too small amount to cover the shortfall as 5*230=1150

ETA: however, £8 will do the job - not that huge difference on a grand scale of things to justify saying that £5 is too good to be true.

TheSpectator

As Hoenir states, this £5 'increase' will only be till the current 5 year fix ends at which point any new deal will be calculated on the oustanding capital (which will be a bit higher than it would have been had you not went interest only for 6 months). The important point will be the interest rate on any renewal/remortgage and the term.