Stick with Interest only or remortgage?
melt71
Posts: 586 Forumite
We have an interest only mortgage that has now run out of it's fixed rate, so we want to renew to a 5 year fixed deal but we want to go onto a repayment mortgage. Long story short, we thought we would have more investments to pay off the mortgage but decided to use them to improve the house so now we need a traditional mortgage rather than IO.
We're with Santander and they have no fees for some of their deals (2.19% for 5 years with no fees at all). I've just tried to transfer to the new deal, but it will not allow me to change it to a repayment mortgage, it will only offer options of Interest Only.
A bit of info...
We are 47 & 45 years old so we still have quite a few working years left.
We are both employed, earning about £45k between us.
No debts other than our mortgage and a decent credit rating.
The outstanding mortgage is £128K
Our house is now worth at least £330K (not just due to the increase in properties around here, we've also made numerous improvements including a large kitchen/diner extension and 2nd bathroom). So it's a good loan to value ratio, which will hopefully give us better rates.
My question is...
Do we go with someone else and go through all the faff of applying for a new mortgage to get the 5 year fix that we want on a REPAYMENT mortgage.
OR
Do we transfer to the new IO fixed deal with Santander which seems quite simple and works out at about £233 a month, and then overpay so that we're still paying £700 each month and the loan reduces rather than just the interest.
OR
A third option I haven't mentioned!
ANY help would be appreciated.
We're with Santander and they have no fees for some of their deals (2.19% for 5 years with no fees at all). I've just tried to transfer to the new deal, but it will not allow me to change it to a repayment mortgage, it will only offer options of Interest Only.
A bit of info...
We are 47 & 45 years old so we still have quite a few working years left.
We are both employed, earning about £45k between us.
No debts other than our mortgage and a decent credit rating.
The outstanding mortgage is £128K
Our house is now worth at least £330K (not just due to the increase in properties around here, we've also made numerous improvements including a large kitchen/diner extension and 2nd bathroom). So it's a good loan to value ratio, which will hopefully give us better rates.
My question is...
Do we go with someone else and go through all the faff of applying for a new mortgage to get the 5 year fix that we want on a REPAYMENT mortgage.
OR
Do we transfer to the new IO fixed deal with Santander which seems quite simple and works out at about £233 a month, and then overpay so that we're still paying £700 each month and the loan reduces rather than just the interest.
OR
A third option I haven't mentioned!
ANY help would be appreciated.
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Comments
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Is there an option of switching to a repayment with Santander, therefore without the hassle of a new lender?
Given your previous decision to sell investments you had earmarked for repaying the IO mortgage, I suggest you do lock yourselves into a repayment, whatever the level of hassle is, because whose to say if you go with IO and overpayments, something else more attractive wont crop up for those in future?0 -
AnotherJoe wrote: »Is there an option of switching to a repayment with Santander, therefore without the hassle of a new lender?
Given your previous decision to sell investments you had earmarked for repaying the IO mortgage, I suggest you do lock yourselves into a repayment, whatever the level of hassle is, because whose to say if you go with IO and overpayments, something else more attractive wont crop up for those in future?
It doesn't look like it, I'm trying to call them to ask but online it is not offering any options of repayment mortgages. If they would transfer us to a repayment mortgage that would be ideal.
Yes I get what you're saying about locking into a repayment mortgage, I definitely want to do this. I probably worded it badly but the investment was an inheritance that my partner had a few years ago that he wanted to use towards the house (I'd already put about £80k of equity into this house when we originally bought it but he didn't have anything to put into it at the time, so he wanted to even things up a bit).
He then decided he wanted to use it on home improvements rather than just paying off the mortgage as we were going to sell and buy a cheaper house but as we now love the house that plan went out of the window
so although we now have a lovely, larger house and we're staying here for the next 10+ years, it now it's time for plan B where the mortgage is concerned. We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com0 -
Santander would need to perform affordability checks. Before switching to repayment basis. Much depends on their criteria.
At this juncture opting for the five year fix @ 2.19% might well be your best option. Though I would suggest upping your monthly payment to build a degree of comfort into your planning. A sharp rise in interest rates in the future could increase your outgoings considerably. At least by overpaying you won't be distracted to spend the money elsewhere.
If you managed to secure a 19 year mortgage @ 2.19%. Your monthly repayments would need to be £687. Currently your £700 therefore looks very much on the low side.0 -
Swap the rate and then set up a standing order for the extra difference between the IO and repayment amount, assuming that this overpayment will not exceed the annual overpayment allowance.
Seems like the quickest and easiest way to achieve what you want, as long as you trust yourselves not to cancel the overpayment.0
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