Remortgage, go interest only or take equity?

Chop

Like many others, I'm concerned about the mortgage market as our fixed rate comes to an end in July. We are saving for a wedding (yay, am newly engaged so still excited!!), and a mortgage hike won't help. (We have no other financial help for wedding so are keeping it as cheap as poss) Here's the basic facts.

Mortgage currently = 2yr fixed with Intelligent Finance taken out over 30yrs, repayment of £870pcm
Mortgage left = £159000
House recently valued at = £190/195k
LTV = on above figures, around 85%
Credit history = very good + we're good earners for our age

We will be looking to use our (whole of market, no fee) broker again but 3 things have been suggested by family which I don’t know whether to ask him to explore. They are:

1) Take out £5k equity for wedding fund
2) Take an interest only mortgage for 2 years, save the difference for the wedding and put back any left over into 'house pot' when reverting to repayment mortgage 2yrs later
3) Stay with Intelligent Finance on the (quite shocking) SVR as we are then entitled to 2 payment holidays each year...so, over 2 years, 4 payments could save us around £4k

I don't know if any of these are worth considering and don't want to make a total balls-up of the situation. We only got on the property ladder 2 years ago after years of scrimping and saving so don’t want to go wrong now. :wall:

Obviously if we could keep our mortgage payments at around £900/£1000 a month, none of the above would be necessary as we can still save enough for the wedding, I'm just very worried about the much-reported 'credit crunch'.

Advice very gratefully received.

Bismarck

"we are saving for a wedding (yay, am newly engaged so still excited!!)"

2 questions:

1) when is the magic day?
2) do you have any other credit arrangements....that you could use without having to effectively pay for this £5K for the rest of the mortgage term?

Chop

In response:

1) The 'magic' day is October 2009 (so plenty of time to save)
2) We both have outstanding student loans, but other than that, no loans or credit cards etc

We really don't want to get into debt for our wedding (doing it well within our means accordingly) so family have suggested it's 'easy' to use equity/mortgage as a way to finance any shortfall. I'm not so sure this is wise....

allan673

CONGRATULATIONS !!!!!!!!

i wouldnt use any equity to pay for the wedding though.bad advice given to you.
have you considered an offset mortgage, preferably one with a fixed rate of interest for a fixed period, this way you could pay interest only, or interest and part re-payment?
then when youve saved enough you can change the payment method to capital and interest.
first direct have some cracking deals, but at the moment they are for there customers only.

Chop

Thanks allan, I hadn't thought of using an offset mortgage. How long are you tied in to an offset mortgage? Is it like any other mortgage in that respect? With the market as it currently is we're considering getting a 5yr deal, as opposed to our planned 2 years.

Geez it's all complicated and unfortunately there ain't no magic crystal ball!