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Original poster

So what happens if you CAN'T pay the repayment part of your mortgage in this situation?

145 replies

LaurieFairyCake · 17/08/2023 07:41

Citizens advice website says the lender is obliged to consider options if you can't pay - like shifting to interest only

A year ago we asked our lender to shift to interest only as there's enough equity to sell off our flat and pay off our second home (where we want to retire to)

They said no as we have to earn £150,000 a year to do that Hmm

Now we HAVE been allowed as the government has forced them to do it for 6 months

We want to keep that going and just pay interest only until we retire in 10 years, sell our flat and pay off our second home

Are they likely to let us?

(My health means that trying to do two jobs is too much for me and at some point I'm going to burn out and HAVE to shift into one job. We can't go and live in our second home and give up work as we're too young)

OP posts:
lovewoola · 17/08/2023 09:12

on the new rate?

lovewoola · 17/08/2023 09:13

does your 2nd property really have no equity? did you not have to put down a deposit?

FredaFox · 17/08/2023 09:28

2nd property when people can't afford one, thousands would love an interest only property but life's not always like that
Sell up and buy your retirement property when you retire
People would love that terrace, possibly your tenants

Original poster
LaurieFairyCake · 17/08/2023 10:03

Well no, if we sell up and move to the retirement property then I lose my job - so it's not possible

If we sold then rented where we are is more expensive than our mortgage - the interest only on our mortgage is approximately £1000 a month (rental would be twice that for a studio)

OP posts:
titchy · 17/08/2023 10:08

LaurieFairyCake · 17/08/2023 10:03

Well no, if we sell up and move to the retirement property then I lose my job - so it's not possible

If we sold then rented where we are is more expensive than our mortgage - the interest only on our mortgage is approximately £1000 a month (rental would be twice that for a studio)

Yes but you'd have a big chunk of cash in the bank which you could use to pay off the BTL mortgage on the future retirement property, and use the rental income to subsidise your rent.

Your current plan is risky - you're relying on the current equity holding its value and being enough to cover the mortgage on the future place. You cannot guarantee the future value of your current home - anything could happen.

Original poster
LaurieFairyCake · 17/08/2023 10:15

Well literally no one predicts property prices falling 60% and it's never happened Confused

We can't rent for multiple reasons - you have to earn 37.5 times your rent a year to pass affordability where I am (and we wouldn't)

The reason I started this thread was because of what Citizens advice say - which is that your lender is obliged to help with an option to go interest only.

There is also a good few pages on citizens advice about your income reducing because of the affects of Covid - which of course applies to us.

I was hoping to find someone who had managed to use the above points to persuade their lender to allow this

(And I've had some great advice 🥰)

OP posts:
lovewoola · 17/08/2023 10:31

Well literally no one predicts property prices falling 60% and it's never happened

60%?

DuckBushCityLimit · 17/08/2023 10:46

Why have you gone on to the variable rate? Can you not get a fix, or do you just not want to lock in at current rates? Just looking at my current lender, their variable rate is 8.74% and the two year fix they are offering us at the moment would be something like 6.55%, so a pretty hefty difference. Ten year fix is 5.23%.

Original poster
LaurieFairyCake · 17/08/2023 12:01

lovewoola

The 60% is our equity

And we won't get a mortgage to fix now under affordability - according to our mortgage company we don't earn enough to get a mortgage now

OP posts:
Elsiebear90 · 17/08/2023 12:14

I’m a bit confused maybe I’m being dumb though, the interest only on your property is £1000 a month? Is this the rental? They won’t let you keep interest only, but also won’t let you switch to repayment because it’s unaffordable? Is the rental property worth quite a lot of money then if interest only is £1000 a month? I thought with BTL you need a decent amount of equity, but you said you have no equity in it?

Original poster
LaurieFairyCake · 17/08/2023 13:03

The interest only on my main property is £1000 approx a month - the repayment is over £900 in addition

The buy to let interest only mortgage is covered by the cheap rent

OP posts:
Original poster
LaurieFairyCake · 17/08/2023 13:04

We're allowed interest only on the buy to let but not on our main property unless we earn over £150,000 a year

The main property has just gone to interest only because the govt forced lenders to do it for 6 months

OP posts:
oiltrader · 17/08/2023 13:05

it sounds like you want your cake and to eat it and eat someone elses !

It seems like you cant afford this and need to grasp the nettle and accept it x

Original poster
LaurieFairyCake · 17/08/2023 13:13

Well you're quite right I can't afford it 😂 - me along with thousands of others are hurting because my mortgage has gone up over £800 a month (I think that's a lot)

Or rather I can if I burnout and work every hour there is Sad

OP posts:
Original poster
LaurieFairyCake · 17/08/2023 13:15

Honestly I can feel myself becoming unwell - my job is supporting people with very serious mental health issues so if I'm not really fit and up for it there's a problem

And frankly I already have a sick husband, I can't get sick too

OP posts:
Jmaho · 17/08/2023 13:15

OK so the BTL is on interest only and the residential mortgage is on repayment
What sort of rate are you on on the residential mortgage? If on variable you can do a product switch with the same lender and there are no affordability checks
They cannot put you onto interest only for the whole term as the criteria is much more strict these days and I fully agree with it being so

lovewoola · 17/08/2023 13:18

Do you have income protection insurance or critical illness cover since your DH is ill & you're becoming iller?

lovewoola · 17/08/2023 13:24

Well you're quite right I can't afford it 😂 - me along with thousands of others are hurting because my mortgage has gone up over £800 a month (I think that's a lot)

£800 is a lot but to increase that much it must be a sizeable amount & the 60% equity has got to be significant

lovewoola · 17/08/2023 13:26

And did you not put down a deposit on the BTl?

Pleasedontputthatthere · 17/08/2023 13:30

OP, have you read the Mortgage Charter that came out recently, that should help. Do you have any arrears on either mortgage?

lovewoola · 17/08/2023 13:31

The interest only on my main property is £1000 approx a month - the repayment is over £900 in addition

The buy to let interest only mortgage is covered by the cheap rent

Are you saying 1k is cheap rent for a cheap BTL terrace? But you can't afford to rent?

Original poster
LaurieFairyCake · 17/08/2023 13:32

No income protection insurance - DH handed in his notice when he got ill thinking he would recover when he stopped doing 15 hour days (teacher)

But he didn't recover and it's now 18 months later

I'm not 'ill', I'm just getting burnt out - at some point I'm going to get too tired/make poor quality decisions etc

OP posts:
lovewoola · 17/08/2023 13:34

And we won't get a mortgage to fix now under affordability
This is really confusing, how long was your previous fix? Can you extend the term? Do you have other debt?

Isyesterdaytomorrowtoday · 17/08/2023 13:34

Could you remortgage over a longer term to reduce the monthly payment?

does the rent on the BTL only cover the interest on that? If it covers repayment could you flip that one to IO and use the remaining rental income to pay your primary mortgage?

Original poster
LaurieFairyCake · 17/08/2023 13:35

No arrears, never missed a payment in over 25 years of paying mortgages

The buy to let is not in the South East, so it's very cheap rent - the income covers the interest payment (of I think about £400)

I didn't know the lender couldn't refuse to let us remortgage ?!? That's really useful

OP posts: