Re-Mortgage from Repayment to Interest Only

Icey77

Good Afternoon Peeps,

I have a one bedroom flat on a fixed rate repayment mortgage at 4.something% that comes to an end at the end of the year and then the rate goes up to 7% odd at least. I know I was a very lucky bunny to get the 4.x% rate 18 months ago in the first place!

I had intended to live in the flat - I bought it for that purpose but ended up living with my boyfriend and renting out the flat.

What I want to know is should I re-mortgage on a repayment or an interest only basis? My boyfriend and I want to buy a house together in the next year or so and we need to start thinking about whether to sell both flats or just his and keep mine as an investment.

Does anyone have any thoughts to make me consider new angles?

Many thanks
Icey x

moneysavinmonkey

sell the flat if you don't need it - pronto!

In the current climate, if may even take you until next year to sell so get it on the market now.

Renting out is a bit of a dead end at the moment. Certainly not a worthwhile 'investment' The rent probably won't cover the mortgage repayments and house prices are falling fast at the moment. bbc today says -2.5% average falls in march but could be as much as -5% in ONE month if you live in the west midlands!!!

If you can get it sold and get your cash out asap this will also put you in the best position for when you need to buy with your boyfriend - as lending is going to be very tight + the bigger the deposit you have the better.

ncooper1974

Icey, give us some figures (current mortgage value, current rental pcm, etc) to show us if the property is still profitable....
I know I might get flammed, but I dont see the point in selling for the sake of it just in case the property will be less in 6 months time.
if you dont need the money, and the mortgage is being covered by the rent, and you're happy to manage the tenants, then why sell up???

hearts

If you are willing to hold onto it and have no great reason to sell then hold on to it. Remortgage to Interest Only. You will need a minimum of 15% equity in the house as the remortgage will be based on around 85%. You will also then need to get a rental of aprox 125% of the monthly mortgage payment.
Speak to a FA with whole market advice. ;-)

moneysavinmonkey

not 'flaming' but just in response to your comment the so-called 'possibility' of the flat being worth less in 6 months time is pretty much a given and not a 'just in case' scenario. House prices have been steadily falling for the last 6 months now and in the last couple of months the falls have been getting more dramatic.

Icey777 states that she wants to buy somewhere together with her boyfriend so she does need the cash in order to do this. Also if her mortgage is going to be going up dramatically she needs to get rid of the house to save money now or she will be subsiding her tenant. The capital tied up in her house will likely make a lot more in interest in a simple online savings bank account - so why keep the property???

OP should post up some figures + rough location though.

pinkshoes

How much did you buy it for?
Where is it?
How much is it "worth" now?
How much is the mortgage, and how much is this in interest and repayment?
How much can it be rented for per month?

Moneysavingmonkey, the OP didn't even state where they live, so how do you know what the market is like in their area and if it's better to sell than continue renting it out??

moneysavinmonkey

hearts wrote: »

If you are willing to hold onto it and have no great reason to sell then hold on to it.

?? why ?? 'no great reason to sell' is hardly a reason to hold onto it!
- other than pure laziness!!!

the OP should do the figures and decide whether it is worth it to sell
or bank the cash. This is a moneysaving website afterall people.

ncooper1974

moneysavingmonkey...i agree with what you say about OP may needing money if she wishes to buy with BF in the future, but as he has his own property, there is the possibility that they could use the equity in there (if any) for a deposit on the new place.

I certainly think that buying a BTL is the current market is, with exceptions, the wrong decisions. However, if the OP is already renting her flat, and she can cope with being a LL, then while she is probably not going to make any money in the foreseeable future, at least she has a safety net should things with her BF not work out.

Although I do conceed that if she is worried, then probably the best thing for her to do, as well as peice of mind, is to sell up and bank the money in a high interest account

moneysavinmonkey

ncooper - well reasoned point, we don't know enough about the OP's + partners realtionship + financials really- the OP can consider that themselves! However, as the mortgage market seems to be reserving the better deals for buyers who can put down the most deposit I would still argue that she would be in a better position if she sells her flat.

pinkshoes - I think i remember on a rent increases thread that the OP had a flat in Buckinghamshire (SE) but if this is wrong then I'm sorry. It is a good point to make though when looking at the national averages reported in the news that individual areas can vary wildly - e.g. I think london prices are still rising whilst in the West midlands they plummeted by 5% in March (halifax figures)

Icey77

Cor, what a lot to think about!

The flat is in Buckinghamshire, towards end of Metropolitan underground line. So down south of the country

I bought the flat Jan 2007 for £140k with £17k deposit so £123k on repayment mortgage. Current mortgage debt is £122k. The monthly mortgage payments are about £612 ish and the rental income has been £550 since it was first let out in March 07 with a 4% increase recently agreed.

I realise that the rent does not fully cover the mortgage payments but I was not too worried as it was paying all of the mortgage for me bar a tiny bit - as already mentioned I had intended to live in the property so was primarily concerned with covering the mortgage rather then making a profit. I could not get out of the VERY good fixed rate 2 year period to switch to an interest only mortgage without paying a huge sum to the mortgage company.

How much would an interest only mortgage be per month? Providing I could even get a mortgage now :rolleyes:

moneysavinmonkey

suggest you talk to an mortgage broker to get a few quotes... having said that mortgage market deals are changing rapidly so whatever they quote you make sure you build an extra bit of margin into your sums.