Is it worth going to interest only short-term?

zowoods

We currently have a variable rate mortgage with HSBC, and pay £1100 a month, currently have £165K left borrowed £175K, our flat is now worth £260K.

Have found out expecting due in Dec and am worried about being able to afford the payments on just my husbands salary, £1900 a month after tax etc. A friend suggested changing to an interest only mortgage for say a yr or so to help.
Not sure if this is worth doing or not any ideas??

pickledtink

Over how many years is the repayment mortgage?
It would be more sensible to expand the period of the loan and continue repaying part of the capital over a longer time. Later when money is less tight you could shorten it and increase payments again.
Better to be reducing the amount gradually than sitting on on interest only IMO.

pickledtink

Also what interest rate are you on exactly?

zowoods

Thanks for your reply. Its over 30 yrs and we have been paying it for just over 3 yrs so not sure if can take it over a longer term.

zowoods

It is guaranteed to not go more than 1% above bank of england base rate so sits 1% higher than this.

EdInvestor

zowoods wrote: »

We currently have a variable rate mortgage with HSBC, and pay £1100 a month, currently have £165K left .Have found out expecting due in Dec and am worried about being able to afford the payments on just my husbands salary, £1900 a month after tax etc.

165k @6% interest only would reduce your payments to 825 pounds a month.

pickledtink

Extend it back to 30 years so @ 6.00% present interest on tracker would be 989.26 per month.
you could also do part repay / part interest only.

zowoods

Many thanks for the replys, did realise interest only would be around £800 but that would leave £1000 a month from my husbands salary. What about re-mortgaging taking out some of the equity in the flat and use some of that money to then pay the mortgage?? Flat worth min £260K and current mortgage outstanding is £165K????

beecher

zowoods wrote: »

Many thanks for the replys, did realise interest only would be around £800 but that would leave £1000 a month from my husbands salary. What about re-mortgaging taking out some of the equity in the flat and use some of that money to then pay the mortgage?? Flat worth min £260K and current mortgage outstanding is £165K????

That would mean upping the mortgage to pay the mortgage - can't see that making sense.

I'd think making it repayment over 30 years and then making the term shorter again once you're back at work would be the best approach, but ultimately it is up to you. Are you going to get any sort of maternity pay?

zowoods

Thanks for reply, its already over 30yrs so not an option.

Maternity pay is 6 wks at full salary £850 after tax fortnightly and then statuatory maternity pay at £117 a week for 33 weeks which is substantially less than my salary as you can see! and this starts as soon as leave work so if stop working 4 wks before birth only lasts up to 2 wks after have baby. I work in retail as operations manager so not sure will be able to work right up until have baby either! but need to really so will have to see how it all goes.

beecher

I don't know how these things work, but as you've got 27 years left to pay at the moment, I think they could extend it to a further 30 years?