How do I switch from an interest-only to a repayment mortgage?
I have an interest-only mortgage with North Yorkshire Mortgages (NYM) with only eight years remaining.
I told my financial adviser that I wanted to convert to a repayment mortgage, but was told that NYM wouldn't entertain the idea. The mortgage is in my name, as I was in business at the time of buying the house. I'm no longer in business but my husband's business is doing very well, so we would be able to afford the repayments.
I worry that, at the end of the mortgage term, we won't be able to remortgage as I don't have a personal income and my husband will be too old. I'm 44 and he's 63.
Are overpayments an option? It would amount to an extra £1,500 per month on top of the £600 we pay at the moment.
It is worth initially pursuing the issue with NYM (a subsidiary of Skipton BS) to check it will not allow the switch to repayment and for what reason.
NYM does have a form on its website to allow for an application to switch the repayment type. If granted, there is an administrative charge, which you should check directly as there seem to be conflicting figures on the website.
It may be NYM has concerns over the affordability of the monthly payments over such a short term, so you may need to demonstrate your higher income level to calm its fears.
If NYM won't allow the switch, you should check how you can make overpayments and whether the mortgage currently carries any early repayment charges (ERCs). If you are able to overpay without incurring an ERC, you will be able to overpay as much as you like
and could adopt a regular monthly amount or pay ad hoc lump-sum payments.
As long as you have a daily-interest mortgage, these payments should come straight off the capital balance.
You should also consider whether you might be able to find a better rate elsewhere and remortgage to reduce the amount of interest you are paying. Most lenders tend to impose a maximum age of 75 but some can go further, although all will, of course, want to be satisfied you have a good credit record and the mortgage will remain affordable.
is a mortgage expert at London & Country Mortgages in Bath.