home
in

Switching temporarily to interest only mortgage - advice required

Last post Mon, Jan 14 2013, 9:48 PM by Zeb. 5 replies.
Sort Posts: Previous Next
  •  Mon, Jan 14 2013, 9:48 PM

    Re: Switching temporarily to interest only mortgage - advice required

    You may not have ever missed a payment in your life but you are now asking the lender to allow you to put your mortgage into the riskiest form of borrowing knowing that you are going to have increased home costs and most likely reduced income....or you wouldn't have posed the question in the first place. itas not the risk that you may pose mnow that the lender is worried about, it is the increased risk on future payments.

    I do think you need to sit down with the bank on this one, while i have little respect for banks advisors sometimes they can know of specific plans that could help individuals. While i don't think interest only is a viable option for you....or even available to you there may be some other options. i never recommend payment holidays due to the fact that it add an interest package to your mortgage balance but it could give you welcome releif for 3 months and it would not cause any problems with credit or arears.....but try and speak to the bank, not all banks offer packages like this but I don't really see any other way to lighten the load...even short term

    • Post Points: 5
  •  Mon, Jan 14 2013, 8:25 PM

    Re: Switching temporarily to interest only mortgage - advice required

    Thank you all for your advice. I spoke with the bank today and advised of the situation but unfortunately the only help they can give is basically to push the mortgage into arrears which will in turn effect my credit rating so I have fled that out as option, I'd rather live on rice for the next few months than do that! It's a shame they can not offer any help especially when they know the full situation and the act the house is up for sale. We have never missed a payment and also use RBS for our current account, savings account, both children's accounts and our home insurance, and none of them are ever in a minus balance......if that's not loyalty I don't know what is!

    Thanks again! :-)
    • Post Points: 20
  •  Mon, Jan 14 2013, 7:54 PM

    Re: Switching temporarily to interest only mortgage - advice required

    I agree - make an appointment to see someone at your mortgage holder, tell them the problem and ask if they can offer a solution.

    Don't start off talking about holidays or interest only, but just present your financial situation as you expect it to be, and see what they can offer. Make sure that you have all the details of current and projected income, the current value of your house and the price of your future home to hand.
    • Post Points: 5
  •  Mon, Jan 14 2013, 8:36 AM

    Re: Switching temporarily to interest only mortgage - advice required

    Rules regarding Interest Only mortgages have changed significantly in recent months and they are now far harder to come by.

    Most lenders will normally only allow a switch to interest only if you can demonstrate financial hardship exists and as this is a planned event I don't think the lenders will be very helpful towards you or your situation as they will feel that you should have prepared better for the maternity....yes I know, full blown recession, rising inflation reduced employment and working hours and you didn't manage to find that extra £20,000 of savings....how silly of you.....but this is what the lenders will assume you need for a pregnancy or that you will have full pay for a great duration of the maternity and not just statutory maternity pay.

    It would always be worth speaking to the lenders to see what the lenders own position will be as it will change from lender to lender. The one thing that is almost certain is that they would limit any particular deal to a maximum of 75% of your property value and potentially 50% if it is for hardship reasons, while the first level is not a worry the second level would encompass your borrowing.

    Its a hard thing to say but if your lender will not accommodate you then your best option may well be to grin and bear it. If you are able to move to interest only it would make a big difference as it will likely drop your payments from around £400 to around £100.

    **EDIT** Instead of maybe looking to switch to interest only you may even be better off seeing if you can arrange a 3 month payment holiday with your lender. This would keep you on your repayment plan but would allow you to completely miss 3 months payments. the interest is rolled up and added to the mortgage balance but this would only be about £300 over the 3 months. tghis would not affect your credit score in any way and would be easy enough to arrange.....Not all lenders offer this service so it would be best to speak to them and see what they can offer.

    • Post Points: 35
  •  Sun, Jan 13 2013, 10:14 PM

    Re: Switching temporarily to interest only mortgage - advice required

    I'm not an expert on these matters so you'll get a more comprehensive response from someone else I would imagine.

    It sounds like a good plan and you'll have a decent deposit for another place. I would look at the contract though and see what the drawbacks are in doing this. Is there any minimum/maximum period that you can opt for interest only? How many times can you swap? Are there any financial penalties later down the line? Is there anything foreseen that could crop up later where you will desperately need to switch to interest only again?

    If you are buying something bigger, presumably the new home will be higher value. Is this something you have factored in bearing in mind you will only be paying the interest on current property?

    • Post Points: 20
  •  Sun, Jan 13 2013, 8:31 PM

    Switching temporarily to interest only mortgage - advice required

    I am currently on maternity leave and considering switching to interest only on our mortgage until I return to work if this is possible. We are in year 4 of our current 5 year deal with RBS and our home is up for sale as we now require something a bit bigger. It is worth approx 70000k with 41000k of a mortgage remaining and 10 years remaining on the term. It would be a temporary reduction of between 6 months and a year and hopeful that the house would sell before then anyway. Any advice if this would be able to be done and the process would be gratefully received.
    • Post Points: 20