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Interest Only - lender insists on switching rates

edited 14 June 2019 at 7:42PM in Mortgages & Endowments
18 replies 1.6K views
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  • getmore4lessgetmore4less Forumite
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    Is it all now on the 10y fix or do you still have the ported bit on tracker?
  • JMA74JMA74 Forumite
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    Check your mortgage offer to see what rights you have.
    There will be a bit there probaly saying you have the right to transfer the mortgage to another property (subject to acceptance).

    I guarantee there wont be a bit saying you have the right to change to interest only in this current mortgage.

    From experience of working behind the scenes of a high street bank, the only way they will agree this mid term is for you to plead hardship but that is a good few years ago so may be different
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Mike48632Mike48632 Forumite
    11 posts
    I’d never seen this forum before yesterday. I think it’s great. Thanks for all your replies.
    Is it all now on the 10y fix or do you still have the ported bit on tracker?
    I have £139k outstanding on the 10 year fix (ending in 6 years) at 3.14%, and £66k outstanding on the tracker for life at 0.29% over base that I ported. Both have 19 years remaining.
    It sounds like some help with budgeting may be useful for you
    Thanks for the offer Kentish Dave but the problem is not budgeting, it’s that my ambitions and aspirations are bigger than my financial resources! I’ll come clean. The real reason for wanting to go interest only is to fund private school fees. I’ve got a lot of excess income after essentials, but not enough for 3 sets of school fees.
    JMA74 wrote: »
    Check your mortgage offer...
    ...the only way they will agree this mid term is for you to plead hardship
    Thanks for the suggestion JMA74 but it wouldn’t stack up as my income is more than sufficient to cover the current repayments (ignoring school fess). I will check the mortgage offer.
  • ThrugelmirThrugelmir Forumite
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    Mike48632 wrote: »
    I’ll come clean. The real reason for wanting to go interest only is to fund private school fees. I’ve got a lot of excess income after essentials, but not enough for 3 sets of school fees.

    Would extending the mortgage term, while remaining on a repayment basis. Free up sufficient cash flow. Lenders aren't normally unreasonable if presented with the full facts.
    “Chances are if you buy what everyone is buying you will do so only after it is already overpriced." - Sir John Templeton
  • getmore4lessgetmore4less Forumite
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    Ask if they will let you change the tracker to IO.

    That would get part way to your goal(freeing up cashflow) without penalty.
    Might have to give up a great rate though.

    10y fix with school fees on the horizon might not have been the best move.

    That raye is looking high these days with 2.4% 10y fixes available.
  • Thrugelmir wrote: »
    Would extending the mortgage term, while remaining on a repayment basis. Free up sufficient cash flow.

    Not on its own but I will ask about the extending the term.
    Ask if they will let you change the tracker to IO.

    That would get part way to your goal(freeing up cashflow) without penalty.
    Might have to give up a great rate though.
    I've decided to leave the tracker alone - I don't want to give up base + 0.29% for the whole term (another 19 years)
    10y fix with school fees on the horizon might not have been the best move.

    That raye is looking high these days with 2.4% 10y fixes available.

    It is looking high, but at the time it wasn't! I thought long and hard before doing it, in the expectation that rates couldn't go any lower. I don't regret it even though...

    I think I'm going to pay the ERC (over £8k), and go for a 2 year fix at 1.59% with a fee of £299 (1.44% is available but with a £999 fee), and switch to IO. It will improve my monthly cash flow considerably. I considered whether I should ask about adding the ERC to the loan, but I think I'm going to pay it.

    If I do the above, as well as improving my cash flow by a large amount, I'll save a lot in interest (over the 6 years remaining of the 10 yr fix). If we assume that rates will stay where they are now for the next 4 years (so I can get the same fixes in 2 years and 4 years from now) and if I continued paying cap and interest, then even after paying the ERC I'd only be worse off over the 6 years by £1,800 compared to remaining on the 10 year fix.

    Thanks for all your suggestions.
  • getmore4lessgetmore4less Forumite
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    If it is cashflow you want then throwing £8K away is counter to that and you can get more than 1.59% interest on that.

    If you have not use your ERC free allowance use the £8k to pay a bit off first then add any remaining ERC back on if allowed, saves £480.

    If you have enough cash pay the full ERC free bit first then borrow more on the new mortgage to replenish the cash.

    Over 6years
    19y term
    £139,000 3.14% £810pm £103,692 interest £23,012
    i/o
    £139,299 1.59% £185pm £139,267 interest £13,288 (-£9.7k)
    if the ERC is 6%
    £147,639 1.59% £196pm £147,610 interest £14,084 (-£8.9k)

    if rates don't rise you cover the fees over the 6 years but have delayed the capital.

    if you can keep the rates and still want to finish in 13y
    £139,267 1.59% £989pm interest £14,981
    £147,610 1.59% £1048pm interest £15,878
    or if you had carried on
    £103,692 1.59% £736 interest £11,154
  • Kentish_DaveKentish_Dave
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    I’ve a lot of friends who go down the private schooling route, and it turns out always to far more expensive than the fees alone suggest. Trips, uniforms, activities etc all add up.

    I’ll be using state schools for mine*, and don’t envy you the costs to come.

    (*After of course doing the middle class thing of moving somewhere with excellent grammar schools.)
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