To not have many options re mortgage

[Aislingk]

I’m freaking out as our fixed term mortgage runs out in July 2027. DP said currently we’d be paying between 4-5k monthly and I’m so scared. Will things change by then and what options are there!? Never done this before!

Your house won't be worth £910,000 with these interest rates rises. It will be worth closer to £700,000. Or less.

The problem with house prices is they are about what people can afford. As less people are able to afford £900k, it ceases to be worth £900k because there is no one to buy it for that amount.

So many people have never had or experienced a higher interest rate. And been used to very low ones. And perhaps imagined they will always be low.

They won’t. And over stretching yourself without wiggle room for an interest rate increase is stressful.

Buy what you can afford. Not always what you wish you could afford.

https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

Put your figures in here and see what the payments would be for yourself. I can't see how he's getting £4-5k, even if we have 4 rate rises over the year.

Yes I don’t get it either!

But that can't be the remaining term as the maths doesn't work. £550k over 35 years at a typical current year fixed rate is about £3k p.m. Over 25 years it's 'only' about £3.4k p.m.

What I should have said is that there seems to be little prospect of interest rates getting lower between now and then, so being realistic if current rates with your current term mean your mortgage is unaffordable then extending the term is likely to be the only real option. To get to a 4.5k p.m. payment on £550k you'll need to have a remaining term of about 15 years, and if that's right you might be able to extend depending on your age. What seems more likely though is that your husband's maths is a bit squiffy and that he doesn't understand amortisation.

There's a major maths failure here.

A £550k mortgage with 2025 years remaining will be £3.2k at 5%

£3.5k at 6%

The rate needs to increase to 10% for it to be just under £5k per month.

It was 35 years when we took it out in 2017

It was 35 years term when we took it out in 2017. Now in 2026 outstanding is 550,000

He’s either exaggerating, got the maths wrong, or he’s remortgaged and borrowed more without you knowing.

Ours just going from 1.36 to 4.8. Gutted. We have a lot of equity and perfect credit. I hoped for a better deal but they're only goung up. But determined not to increase the term. It's really tough for people.

35 years is the term.
The remaing terms in 2027 is 25 years.

I understand 35 less 10 is 25.

My typo says 2025 instead of 25 but the information in it is correct.

Ok so he could be exaggerating then. If we increased the term would it be less?

Right so by next July you'll be paying back about 540k over 25 years - at typical current rates that's about £3.4k p.m.

I reckon what your husband's done is multiply 550k by the current typical mortgage rate, then added (550000/25), then divided by 12 to get about £4.5k. Not taken amortisation into account, basically.

Sounds right thanks!
is there any way we could get to paying less (basically I would happily downsize but DP and 3dcs won’t budge)

The monthly payment would be less but the total amount you pay would be more, so avoid this if you can help it.

I would sit down together and work out the actual realistic worst case scenario (it's more like £3-3.2k than £5k) and whether you can afford it.

Would we be eligible for interest only?

To pay less assuming everything else stays equal you need to...

Extend the term or
Move to interest only.

Both of which will cost you more in the long run.

If you are on a joint income of 200k then you are not hard up. You just need to sit down and budget things out properly.

What do you think would happen if you borrowed the same amount but paid it back over a longer period? I realise you're probably panicking a bit, but try to think straight.

Would it be possible for you to extend the term? How old are you and when do you plan to retire?

Have you done any maths yourself to check your husband's working out? It does seem like he's either not really understood how to calculate payments at various rates, or he's very pessimistic about what's going to happen.

Thanks however we are not planning to stay here for long, I would have happily downsized ages ago as I think even paying 2.5 k monthly is extortionate! (Even tho we probably can afford it tbh).

Switch to interest only and put whatever you would have paid towards the capital into a high interest account/investment (caveat: I am not a financial advisory)

DP said we wouldn’t be eligible for interest only as our term is too long? Not sure if that’s right, or the ltv..

OP, you have a joint income of £200k. I would be looking for ways to absorb the additional cost rather than switching to interest only or a longer term, which will cost more overall.

On £200k you must have about £10k pm take home . Is living on £5k pm after mortgage an issue?

Our bank offers better rates for existing customers. I would use a mortgage calculator and see how your payments will change. On a repayment mortgage double interest rate doesn't equal double repayments

You aren't a financial advisor? Surely you must be, with that quality of advice.

OP.... don't do this. It would be stupid.

Interest only won’t necessarily cost more longer term but you need all the figures. Interests rates on savings need to be higher than on the mortgage