Problem going interest only

loopylu36

Hi

Due to my debt issues, I would like to change my mortgage to interest only for a little while. This will provide me with an additional £300 per month. However, my mortgage is with Direct Line (RBS) and they have told me that I cannot do this unless I prove I have a repayment vehicle (ISA, Endowment or whatever) in place. However, this will cost me more than the repayment mortgage (I think) and therefore not save me any money. Does anyone have any ideas as to how I can get around this problem?

Thanks

Gorgeous_George

Are you likely to receive an inheritance? They might consider that a suitable repayment plan but it's a long shot.

GG

chappers

Why not just open up an ISA pay in the first months amount and then take it out again.

loopylu36

Yeah, I had thought of that Chappers, but wasn't really sure of the amount that I would need to pay in? I have been on line trying to get "quotes" for an Endowment but don't seem to have to have much luck (I know an ISA and Endowment are two different things- well sort of!) Do you know of any where on line that i can set up an ISA? Also I am assuming that this will not be seen as an "asset" or savings so far as DMP is concerned?

Thanks so far

MartynwithaY

I think the general idea is to pay in the difference between the repayment and interst only amounts. So in your case ~£300 to satisfy your mortgage provider.

I would forget about endowments and search for equity ISAs, there are loads of companies that provide these, especially the 'fund supermarkets'.

Once you have set one up there shouldn't be anything stopping you from cancelling it and withdrawing any money payed in.

Hope this helps.

phlash

You're trying to solve your money issues by creating more issues. Going IO is a risk in itself. Is it just for a 12 month period for cash flow reasons?

Or is it because this is a 'solution' to a long term problem. If this is the case, I would reconsider, because you would be delaying the inevitable. If you are in that much trouble, then look to other areas, by going to IO you will be decreasing your cash outflow, but increasing your debt. (Mortgage will gain more interest as you're not reducing capital)

The reason I say this is from the wording of your original post, stipulating that you needed to save money, but I may have misunderstood somewhere along the line.

dunstonh

You are just delaying the inevitable. When you eventually go back to repayment your monthly payments have to play catch up and you wont be able to afford it and in the end you have to sell up.

Lenders have been encouraged by the FSA to not allow interest only without proof that there is a repayment vehicle.