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Original poster

Who else has switched to interest only because you're 'allowed'

43 replies

LaurieFairyCake · 08/08/2023 12:10

I just have Sad

We weren't allowed to 6 months ago when the COL rose beyond what we could manage - when we called them up they said we could only do it if we earned over £150,000 per year - Yay, another rule in favour of the wealthy Hmm

So we decided to do it today after the govt announcement a couple of weeks ago - couldn't get through the times we tried but they've now put a form up to apply where you don't have to call

I feel like crap doing this, but have to.

OP posts:
Corrag · 08/08/2023 15:51

Sorry @Chewbecca , you clearly stated that in your post. Ignore me, brain fart moment.

MammaTo · 08/08/2023 16:29

I fully appreciate why people are going to take this offer up but it’s only a temporary measure. I plead with anyone who is using this service to get something in place for when the 6 months is up because I can’t see interest rates coming down enough to make a difference.
It’s such a shit situation I can’t believe we’re having to resort to this 😖.

Original poster
LaurieFairyCake · 08/08/2023 16:37

Well I'm hoping that I will get a pay rise in January (it's guaranteed if I pass a course my work is funding) and DH has taken a job a day extra a week - his first pay packet for that will be 30th September

I can literally only hope that this is some way towards being enough as there are no other options apart from selling the house - which we will do come January if we have to.

OP posts:
MumLass · 08/08/2023 16:47

No, but I extended from 16 years to 27. the benefit of that is I am on a 2 year fixed deal and the term extension stays in place for the full term of the deal. The interest only option, although cheaper, only helps for 6 months and I think the interest rate problems will last longer than that.

Replyingtoyou · 08/08/2023 16:48

Bear in mind it could affect you financially long term - we were told it wouldn't be on your credit file when we took a 6 month payment holiday during COVID. When people were moving house, banks started looking at other mortgage details to work out if you took a payment holiday. Google it, it was in the news.

SilentHedges · 08/08/2023 17:02

Corrag · 08/08/2023 14:07

Well the recommendation is that everyone on a variable rate should do it as rates are high at the moment - and if you can afford (we can't) to save the money and rates go down in 6 months you can use the money you saved to pay a chunk off the mortgage

I don't understand this. You don't pay any capital for the six months but you save the money and pay it as a lump sum at the end of the six months? Why is that of any benefit? Might as well be paying the capital each month. Am I missing something?

My thoughts too 🤔

dreamonlucid · 08/08/2023 18:44

We have been interest only for over 6 years, I have no plans to ever go back to repayment if we can avoid it.

We are leveraging the extra capital (house equality) that we freed up in savings and investments and the house is paying for itself, and if push comes to shove we can sell and pay it off and genuinely downsize.

As long as you come up with other ways to pay the capital then interest only allows you to have financial when you need it most, it baffles me why people stick with repayment mortgages if they have the opportunity to reduce monthly payments during harder times.

We owe almost £500k and pay £900pcm this will change next year but not drastically.

KievLoverTwo · 08/08/2023 19:32

I don't have a mortgage so can't comment but the last thing I read about interest rates is that they are now likely to peak at 5.75% and iirc the BoE stated that they think they are going to have to keep them high for about a year to get inflation under control.

Do you have a backup plan for after the six month period? Could you perhaps get a lodger?

cestlavielife · 08/08/2023 20:17

dreamonlucid · 08/08/2023 18:44

We have been interest only for over 6 years, I have no plans to ever go back to repayment if we can avoid it.

We are leveraging the extra capital (house equality) that we freed up in savings and investments and the house is paying for itself, and if push comes to shove we can sell and pay it off and genuinely downsize.

As long as you come up with other ways to pay the capital then interest only allows you to have financial when you need it most, it baffles me why people stick with repayment mortgages if they have the opportunity to reduce monthly payments during harder times.

We owe almost £500k and pay £900pcm this will change next year but not drastically.

How will it not double? Assuming you on a low rate eg 1.5
How will it not increase to at keast 3 or 4 % or more likely more next year?

BLT24 · 08/08/2023 20:27

I’ve done it and we are on a 5 year fixed rate until Nov 2026. Did it purely to build some savings as I had to give up work recently due to ill health. We have 28.5 years left on the mortgage so the six capital payments we have not made will be spread across the rest of the mortgage.

We live in a much larger house than we need though and have already decided we’ll member fully pay off this mortgage and we’ll downsize at some point so I’m not concerned.

BLT24 · 08/08/2023 20:32

*never fully pay off this mortgage

Meant to add we filled in a simple form online and got a text the day day saying it has been put in place, it was really easy to do.

I’d tried to switch to interest only before the government charter was announced but we were declined as the bank said we had to earn a minimum of 100k between us which we no longer do unfortunately due to me not working

LucifersPain · 08/08/2023 20:40

For every £100k borrowed at 6% for 16 years you pay back £155,819
For every £100k borrowed at 6% for 27 years you pay back £202,212

Extending terms can get very expensive people, beware.

dreamonlucid · 08/08/2023 20:45

@cestlavielife it may double but it's on a fixed at the moment so we would pop it on a variable and wait to fix again.

We have free capital so could pull some from an investment to help pay if needed or pay down some borrowings.

If it doubles it would only be £1600ish which is also affordable.

In essence we will never pay the mortgage on our current home, so we are simply renting the money from the bank at the lowest rate possible.

I have no desire to be mortgage free but broke in in 40s/40s and 60s.

I'd rather live in a fab house for those 3 decades with low stress the ability to save and travel and pay for uni etc and then sell up and pay back the loan.

It's like doing a "equity release" but when you can actually enjoy it.

For many reasons, life is short and it's not everyone's approach money.

Heatherbell1978 · 08/08/2023 21:04

I think all these strategies are fine if you understand them and the consequences and in some cases you can make the system work for you. We fixed a low ish rate in May for remortgaging and released some equity now that we don't need for 5 years so given where rates are, we'll make money in that time. Then extended the term to longest we can to keep repayments low but knowing we will repay the mortgage in full in 12 years from pension lump sum.

Chewbecca · 08/08/2023 21:13

Thing is, if you save the capital instead of paying it off then you end up either having to spend the first £500k of your savings paying off the loan (ouch) or you have to sell up which no one actually wants to do when it comes to it.

I would much rather aim to pay off my mortgage (no more payments, yay) AND save into the pension & enable me to stop work early.

paddingtonbear1 · 08/08/2023 21:44

We probably will next January when our fixed rate ends. Our mortgage would go up by about £900 a month, we can't afford this. We are already trying to sell our house (we planned to anyway) but we got messed around by one buyer and no luck since :(

cestlavielife · 08/08/2023 22:08

dreamonlucid · 08/08/2023 20:45

@cestlavielife it may double but it's on a fixed at the moment so we would pop it on a variable and wait to fix again.

We have free capital so could pull some from an investment to help pay if needed or pay down some borrowings.

If it doubles it would only be £1600ish which is also affordable.

In essence we will never pay the mortgage on our current home, so we are simply renting the money from the bank at the lowest rate possible.

I have no desire to be mortgage free but broke in in 40s/40s and 60s.

I'd rather live in a fab house for those 3 decades with low stress the ability to save and travel and pay for uni etc and then sell up and pay back the loan.

It's like doing a "equity release" but when you can actually enjoy it.

For many reasons, life is short and it's not everyone's approach money.

Oh i agree. Effectively it's renting the home from the bank, at much lower than a market rent (tho you pay maintenance etc) and planning to sell it at the end take the equity.
It can work....so long as some equity is there. And you accept risk of being forced to sell up in a downturn

JustGotToKeepOnKeepingOn · 09/08/2023 07:36

I switched to interest only when DD was in nursery. I'm a single mum and couldn't afford to pay nursery fees and the mortgage. So I did interest only for 3 years. Once DD was at school I switched back to repayment and overpaid. I'm sure Martin Lewis would be horrified but there was nothing else I could do. Sometimes you just have to go with it.

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