Anybody switched to interest-only mortgage?

[ibizanick]

Hi All

I'm probably not in an unusual position. I bought my house in Ibiza about four years ago when I was earning more than I did last year, although prospects for 2010 look rather better. But basically my mortgage is gradually eating up my savings.

The house is on the market and properties are selling here, but slowly. Ideally the sale of the property would cover the remaining mortgage and leave enough to buy something smaller and without a mortgage. That could take a while.

An alternative or stopgap would be to move to an interest only mortgage. At the moment most of the monthly charge is for the capital repayment.

I know some banks are allowing customers to switch to interest only and I'd be interested to hear from anybody who has managed to do it. My main concern is about flagging up financial problems to my bank. I haven't missed any payments or anything like that. But my income isn't as good as when I originally took out the mortgage. In fact I probably wouldn't get the same level of mortgage today.

So is it just a matter of going along to my bank and asking them to change the mortgage? Or do I have to go through all the proof of earnings rigmarole again as if I was starting from scratch?

Thanks for your help.

 

[reeds]

Spain Mortgage Interest Only

Hi. I am not going to give you the good news you want, except that most of the banks are willing to give you an interest only mortgage. Yes, you do need to provide them with all the current information on your finances which they require and yes, it will cost you as it has to go to the notary again. The cost will depend on the value of the loan. They would rather give you an interest only mortgage instead of you handing them the keys. They have thousands of dumped properties from people whom have only paid a few hundred off their mortgage. If you still have equity in your property, they are more than likely to listen. Ours did actually appreciate us contacting them and asking for a break in our payments. They gave us a 2 year interest only. Remember in Spain the rate of interest you are paying only changes on the anniversary of the mortgage. We were paying a high interest fixed from the year before and when the rate changed in November it reduced our repayments by a considerable amount. If you are near the anniversary of your mortgage you might find that it will reduce anyway to the current interest rate.

I hope this helps. Remember to ask for all approximate costs upfront so that there is no great surprises.

Chris

 

[ibizanick]

Hi Chris

Thanks for your reply. Can I just clarify something? You say you got a two-year interest-only period. Did that mean you had to start a whole new mortgage or was it part of the exisiting mortgage? The reason I ask is that it does make a considerable difference to the fees. It sounds as if the deal you got would suit us perfectly as it would take any immediate pressure off.


Nick

 

[andyintheworld]

You can apply to your current lender (the easiest way to solve your problem) and see if they will switch you although they tend to take advantage of these situations and bung on large fees.
Other alternatives are few and far between if you are non-resident although you could go for a 60% remortgage to interest only with the lender picking up the costs but you need a property valuation of 234,000€ minimum to do this. Decent rates of interest but it is a full application - banks statements, P60´s and all the rest of it....
Also if you have missed any payments or even been a day late over the last 6 months or have any discrepancies on your UK credit report then your case will be declined.

I do mortgages in Spain but unfortunately remortgages are difficult and a pain in the arse! Even though they brought in new rules in 2008 to make them easier, it wasn´t really designed to help out non-resident buyers.
Anyhow . Best bet is to see what your current lender will do for you and find out how much it is going to cost.

 

[kathy2]

I got solbank to extend the loan till I am nearly 80, that reduces the payments.

But I am here looking to get out of the Notary fees, I dont see why I have to travel and pay massive fees when there are perfectly good notarys in every country at a tiny proportion of the cost

 

[DC]

Good answers everyone. If you use a mortgage broker he can give you a selection of the banks, eg. 20 to 30 banks in one go, and see who is doing the best and cheapest interest only product for you, with the longest interest only period and with the lowest fees.
It will depend on your current mortgage and your redemption (early repayment penalty) to see if you cancel your exisitng one and take out a new one.
Worth refinancing now if you can, because of the historic low rates we are having.