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Mortgage switch to Interest Only

  • 12-08-2009 11:04pm
    #1
    Pentimento
    Closed Accounts Posts: 5 ✭


    I am struggling to pay my fixed rate capital and interest mortgage at the moment and the fixed rate doesnt expire for another year - is it correct that the bank (of Scotland) can penalise me with a whopping penalty if I insist on changing?


Comments

  • #2
    homer911
    Registered Users, Registered Users 2 Posts: 5,150 ✭✭✭homer911


    Absolutely true. You can but ask..


  • #3
    uberwolf
    Registered Users, Registered Users 2 Posts: 7,581 ✭✭✭uberwolf


    it may seem like a penalty. What is actually happening though, is that the bank entered into a contract to buy the money for your mortgage in the background, and agreed a rate for it. If you break out of fixed rate, they are left with a contract for that money at a higher rate than they can sell it for. The break fee is the difference between what you asked them to buy for you, and what they can now sell it for given you no longer want it. It's break even for them. They may charge a administration fee on top of it, but I'm not even sure they're allowed do that


  • #4
    Duckjob
    Registered Users, Registered Users 2 Posts: 2,859 ✭✭✭Duckjob


    Based on your thread title, there's 2 parts to your question.

    As previous poster said bank can and will charge you a hefty fee to get out of a fixed rate agreement with them.

    Other question is if you are looking to switch your mortgage from annuity to interest-only. They're highly unlikely to even entertain this idea.

    Interest only seemed like good sense to lenders when assets were appreciating in value at ridiculous rates. In these times, it makes sense for lenders to have people on regular annuity mortgages paying down the debts.


  • #5
    Drumpot
    Registered Users, Registered Users 2 Posts: 19,306 ✭✭✭✭Drumpot


    Duckjob wrote: »
    Other question is if you are looking to switch your mortgage from annuity to interest-only. They're highly unlikely to even entertain this idea.

    Depending on your circumstances , financially, and depending on the lender, they will certainly consider interest only if you hit hard times. I know this for a fact.

    The problem is that you would have to be pretty hard up, moneywise, to convince them that you cannot afford the repayments.

    I know people that say how much they are struggling and then they are off on week holidays, out of the booze at least once a week and who never miss an event in their social calender. This is ridiculous and if I didnt laugh I would cry!

    Do up a budget with all your primary unavoidable expenses - Mortgage, gas, esb, food etc

    After that do up a list of things you regularly spend money on and see where you can make savings. You would be surprised at the amount of money we all waste week after week.

    The Mortgage lender will look for bank statements to back up your figures (so you cannot simply make them up!). I cant speak for all the banks , but most of them will try to be accomodating to people who OBVIOUSLY cannot afford the current repayments.


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