Switching mortgages

[collyp]

Just picking up on something mentioned by another person on here, what are the consequences of attempting to switch from a repayment to an interest-only mortgage while in an IVA? Obviously, this would free up more money per month (which could be used to add to the monthly IVA payments), but would the creditors be likely to reject this proposal because of the affect it would have on the equity available from the 'year 4 remortgage'?

[MelanieGiles]

No - I feel that creditors would rather prefer the benefits of increased ongoing contributions - and at the end of the day you keep the equity as low as possible for the end of IVA release - which you have to repay over a much longer period.

[collyp]

Thanks Melanie. Then again, my mortgage is with Northern Rock - they were also one of my unsecured creditors, and the only one to vote against my IVA - do you think their mortgage division would be more flexible?

[MelanieGiles]

They are certainly allowing people to switch from repayment to interest only so far as I am aware at the moment - I had a client do this just this week.

[collyp]

Great - many thanks again.

[olympic_torch]

Melanie.
Hypothetically speaking.
What are the consequences for switching from a repayment to interest only mortgage for a 50 year old in IVA, with 15 years left on his mortgage?.
Can he do it? is it an advantage?

what's my name?
where am i?

[MelanieGiles]

You will have to ask your lender if they are prepared to allow this - many do especially in the current economic climate, and if you have the final year equity release (which I know you do!) then by carrying on paying a repayment mortgage throughout the IVA you are merely assisting to create a potentially larger lump to raise into the future.

Any savings, however, would have to be passed onto your creditors by way of increased contributions - but those do stop at the end of the five year point.

[olympic_torch]

You may remember i am not alowed to tinker with mine, (steady on, iva i mean) for the first 24 months. Not sure how that affects things.
An interest only mortgage seems a good proposition, as i know i will be in queer street if i am forced to raise equity in year 4 as per my agreement.
I am just a little concerned on the long term aspects of altering my mortgage, as mine does not finish till i am 65 anyway, and i can't afford to extend the term, either financially or
mortality wise !

[MelanieGiles]

You are not estopped from changing your mortgage during that 24 month period OT!