TSB Interest Only Mortgage.

[Jules79]

Hi guys, Happy New Year! Its been a while since I posted last which I think is because things have been going well thankfully. I have a question more so out of concern of not knowing the consequences. Brief background - Our IVA was completed with F&F in Dec 2014 approx 2.5 year into our IVA. We are now just on countdown for the 6 years (15.03.18) to come about in order for our credit files to improve and the IVA to disappear off the systems.

We have an interest only Mortgage with TSB (was originally with C&G) we have 19 years left on the mortgage with no current repayment plan due to knowing that the chances of us getting a decent interest rate would be highly unlikely. Plus whilst I'm currently not working due to ill health the lower payments are helping us out financially. Throughout the IVA we have always maintained our payments and never accrued any missing payments etc.

My financial adviser at the time of the mortgage has since left the company however when we received a letter a few years ago explaining that they no longer offered interest only mortgages, so we therefore needed to have some kind of payment plan in place, the advice she gave at that time was "You've got a contract with terms and conditions all signed, they cannot change anything so long as you keep up your payments"

We do however plan to remortgage the house in the next couple of years to a repayment, however we want a good rate. Also i'm not sure how it works in regards to earnings as I'm currently not working and hubby's self employed business (construction industry) has taken a knock since we took the initial mortgage out therefore although we are financially better off now being dept free, the sums and official paperwork may not stack up.

I guess I'm just after some advice in regards to whether I contact TSB and explain the whole IVA situation AGAIN even though they are aware cos of the IVA process for land registry etc... Can they force us into a repayment or can they offer us a repayment mortgage on the interest rate we're currently paying (2.5%) or are we best to continue our plan of waiting for the IVA to come off our file and then go down the remortgage route then? We've even considered making some regular affordable over payments in the meantime? I feel panicked since receiving a letter today which is asking us to fill out a form of "intent" of our plans with proof sent in to them which they want us to send back?? It doesn't have any send back by date or anything particularly legal about it, even though they've worded it in part quite worryingly - 'Please remember to review your plan regularly durning the term of your mortgage. Its your responsibility to make sure you can repay everything you owe. If you're unable to repay your mortgage you may have to sell your property so you can repay your loan'.

Even if worst case scenario is that we never repay any of the mortgage, we live in a large 3 bed detached house which I imagine in 19 years will be worth double what it is right now. We could simply sell and down size as our kids will be in their mid 30's and should be settled themselves??

Sorry for rambling

[kallis3]

Hi,

Nice to see you again and hope your health improves soon.

I would suggest that you have a word with either Ryan from Zebra Money or Shaun from Select for advice on mortgages - they have been instrumental in helping many posters.

[Lisa Thomas]

I agree - this is a specialist area and I'm sure they will be able to advise you accordingly.

[Foggy]

I also (boringly) agree.

The bank are being responsible in reminding you that you need to have a plan in place to repay the mortgage in full by the end of the term. I don't think there is any "threat" in their intentions.

An early chat with Ryan or Shaun can help you with the spadework in preparation.

[Jules79]

Thanks guys,

We're by no means wanting to stay on interest only for the long term. We had initially started the mortgage 11 years ago as repayment but as a last ditched attempt of pulling back some money to pay our way we decided to remortgage and fixed at a term that was low at the time but shortly after we fixed the interest rates dropped dramatically but left us tied up at a high interest back then of 5.9% for 5 years. Therefore as our fix term expired a year ago we left it to run as interest only at 0.5% above the banks base rate. which meant our payments dropped significantly and gave us more disposable income to get ourselves back on our feet.

We had the opposite effect. Those that fixed on low interest now cannot afford their mortgages and are being directed down the IVA route, we remortgaged at a high rate which consequently ate into our disposable income and led us down a spiral of no return. We're now in the best position we've ever been in.

However our plan to change to repayment is still on hold until the 6 years have passed so we get a better rate.

I would really appreciate some advice from one of the finance guys you've listed. I will happily contact TSB however I do like to have all of my facts first. Thank you

[Foggy]

You can find their details under the "Quick Links" button ( top left) then "The Team" from the drop down. They are Ryan Radford and Shaun Vickery (in yellow). Clicking on the names will bring up their profiles.

[Jules79]

Thanks Foggy

[Michael Peoples]

If you switch to a repayment mortgage you may never be able to switch back. Given that you have a decent current deal would it not be better to make overpayments off the balance or save up any extra money to make capital reductions later. Interest rates will rise eventually at which time you could look at a total remortgage but in the meantime it may be worth just paying whatever you can off the balance.

[Jules79]

Thanks for your advice Michael,

Your advice isn't far from our own plans. Currently we we're taking advantage of the low interest rate. Getting some savings in place and rebuilding our financial situation while we wait for the 6 years to pass. We have considered making over payments and did contact them for a standing order form. This was something we looked into at the end of last year and have stalled starting it with it being christmas and hubby being off for the two weeks break with no wages. Going forwards I think we shall follow your advice and make regular affordable over payments with the plan to remortgage when the market is more appealing and hopefully as things improve with my back injury I shall be heading back into the work place giving us more choices.

[Michael Peoples]

I think this is wise. At least if you are making voluntary overpayments you are not committed each month so the like of Christmas can be dealt with. If you did completely switch to repayment you would have to find the money every month and would have no flexibility at all. The other advantage is that if you continue to reduce the balance of the mortgage you will decrease the loan to value when you do look to refinance and the lower the loan to value the better and more available are the products.