advice please

mildred

Hi im new to this and would appreciate any advice
i have a mortgage of £57.000 it is an interest only,at 11%
i have contacted a mortgage broker and he can get me a new one at 7%
which is over 8 years.
because of poor credit record in the past he explained this would give me a chance to repair my record and that after 2 years to go back to him and he would get me a better offer.
What im worried about is that if after 2 years i cant get remotgage i wont be able to pay this off in 8 years.

Martin_Moore

Mildred,

You say you have an interest only mortgage, do you have an endowment policy to run with the mortgage.

Do you have an penalties to pay on on the current deal at 11%. If the broker has obtained a rate of 7% did you tell him exactly what bad credit you have as rates of 7% are not that bad a the moment.

What is the house/property value and why the term of 8 years on an interest only loan. Is this linked to a retirement age?

mildred

no we had to let the endowment policy go when my husband had an accident 5 years ago, no penalties to pay he knows all the bad credit history
everything has been paid off.
2 bed bungalow £250.000
he said this is how long the new mortgage would run for

Martin_Moore

Mildred,

The main issue to me seems what are your plans after 8 years. Do you plan to sell and downsize to another property. As at the end of the term you will still owe 57k.

I am still unclear why the remortgage is set for 8 years. Are you aged 57? or aged 62 and still working? Otherwise you should try and get a longer term.

It would also suggest that your credit history is not that bad. You have a lot of equity in the property but 7% would suggest that your credit history is not as bad as you think.

Are you getting free legals and valuation with the new remortgage? And what fees are involved?

mildred

we are both 56 the mortgage we have now is for another 20 years the adviser said this new one would be just for 2 years just to get a better credit record we will be £200 a month better off which will go into a savings to pay off at the end We have to pay £480 valuation

Martin_Moore

Mildred,

Did you ask for the option of getting a repayment quote over 8 years. Will you be receiving anything from a personal pension plan after 65. Are you going to continue to work after the age of 65. If so you could extend the term.

If you do it might be better to get a repayment mortgage.

Did you get any other options other than a 2 year fixed rate. Perhaps a longer term fixed rate over a longer term is the answer if you are certain you have no plans to move property. And if you could afford it switch to a repayment plan.

The £480 valuation is a bit high.