Re mortgage after an interest only tracker - help

Homer_Simpson_4

I am a while away from my current 2 yr interest only tracker mortgage from ending (January 2009) but am I right, in the current climate, to be very worried?
Things that I think I have going for me: Despite 3 interst rate rises during the term we have paid every installment, both mine and my partners wages have gone up by a total of 10 k since we got a mortgage, er thats it!
Against: 100% mortgage, eeek, with not much in the way of savings (2k tops), with RBS who are pulling mortgages left right and centre, value of house only slightly more than we bought for (and probably dropping).
Any advice would be gladly recieved. Do we, when the time is right, ask RBS if they can better what we have? Save and scrape like a beast to try and get 10% of mortgage by Christmas (not really likely) or carry on after the 2 year period and ride out the ridiculous jump in installments it will go to? or is it too early to call yet anyway? Sorry question overload...!

beecher

I think if your wages have gone up by 20k in the last two years, then you should be able to save a lot by January 09. I think if you can at least get down to 95% LTV you'd have the option of not being simply placed on the SVR.

If you post salaries and mortgage details, people could probably give you a better idea, but realistically you should be able to get your savings up to £10,000 unless you have debts.

And if you post a SOA on the Debt Free subforum, people would give you a good idea of what you can cut back on in order to up your savings.

Are you intending to move to a repayment mortgage at some point in the future? If not how do you intend to pay the mortgage off?

Homer_Simpson_4

Thanks for replying beecher. PLEASE forgive my ignorance LTV/SVR? Wages have gone up between myself and my partner by 10k Mortage is for 140k My wage is 23k (due to go up to 25k in sept, partners is 20k). Got about £500 in debts elsewhere not much. The plan was to save and then go onto a repayment after the two years but will anyone give me one beecher?

beecher

Your mortage is 140k at the moment - if the value of your house is 140k that means your LTV is 100%. You'd want to get it down to 95% by January 09 so if all things remain equal, you'd have to save up £7,000 by then. The unknown quantity is what the house will be valued at by then - if it is substantially less then you're going to be in negative equity and will find it hard to get a deal. I don't really understand how interest only mortgages work, so someone else would explain what'd happen, but I'd assume you'd go onto the Standard Variable Rate (7.25% at my mortgage provider, don't know about yours).

However, no-one knows where we'll be by then, and how house price decreases will affect your particular house so best not to panic. However, best to be prepared so I would advise saving as much as possible - if you both open ISAs and try to get £3,500 in each one it at least gives you a cushion. It is amazing how much you can save when you put your mind to it - my pay's being cut drastically so I've been saving 1/4 of my wage in preparation. Once you get used to it, it isn't that hard. Just avoid shops for a year to avoid temptation!