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Mortgage Break or interest only???

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  • 09-04-2009 6:29pm
    #1
    Snookered
    Registered Users Posts: 43 ✭


    Hi All,

    Just a quick question on a mortgage
    Due to tight cash flow -
    I want to look at taking out either of the following options:
    a) Mortgage Break (moratorium)
    b) 12 month Interest only payments

    Has anyone ever taken out either of these?
    or which one of these would you advise on?

    Obviousily option (a) means no payments for 2 or 3 months...i think
    or option (b) meants lower payments for 12 months

    Would love to hear your feedback on anyone who has been through either of these....

    Thanks


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    #2
    Toots
    Administrators, Business & Finance Moderators, Society & Culture Moderators Posts: 16,919 Admin ✭✭✭✭✭Toots


    I took a moratorium on my mortgage about two years ago, it was during the better times though, so I'm not sure if it'll be more difficult now. It was part of my package that I could take a 3 month break at any time in the mortgage.

    The one thing you'll have to be aware of is that once the moratorium finishes, your repayments will be slightly higher, because there will be additional interest accruing while you are not making payments, and your repayments will be adjusted accordingly to ensure the loan is payed off on time.


  • Options
    #3
    Acer2009
    Closed Accounts Posts: 6 ✭Acer2009


    Snookered it really depends on your situation and if your bank will approve either, its at their discretion. If you are still able to make some of you repayment the interst only might be a better choice because you can normally getting it for a longer period of time but means interest isnt being added onto your loan. If you have no mone at all well then the payment holiday might be what you need..

    As mentioned in another post, both options will result in a higher monthly repayment once you go back paying the normal way..


  • Options
    #4
    Snookered
    Registered Users Posts: 43 ✭Snookered


    Acer2009 wrote: »
    Snookered it really depends on your situation and if your bank will approve either, its at their discretion. If you are still able to make some of you repayment the interst only might be a better choice because you can normally getting it for a longer period of time but means interest isnt being added onto your loan. If you have no mone at all well then the payment holiday might be what you need..

    As mentioned in another post, both options will result in a higher monthly repayment once you go back paying the normal way..

    Thanks Acer
    Just to confirm though -
    I was under the impression it was only the 'Moratorium' that would result in higher payments after the break period not both options? is that right?

    I spoke to the bank and they want to review my financial situation before looking at the best option - to be honest I don't like the sound of the moratorium because I honestly do not want to come back to Higher payments after the break.
    I'd rather take the lower payments for 12 months and free up a few hundred €€€€ each month for a year to help free up cashflow and clear the back log of bills!! :o
    Hope they do not try to force the moratorium on me, becuase that's all they were harping on about when I spoke to them :(


  • Options
    #5
    Acer2009
    Closed Accounts Posts: 6 ✭Acer2009


    If you get interest only for say 12 months and then after this period of time you request your term to be extended by 12 months your repayment will be the same as they are now.

    i.e. If you go on interest only now owing €200K over 35 years in 12 months time you will still owe €200K but it will be recalculated over 34 years. So if you don't want your repayments to increase you will have to get the term extended by what ever interest only period you avail of. (this could result in your life insurance having to be modified).

    Obvioulsy it varies from bank to bank, but I would have thought most would prefer you going on interest only as this means your still paying interest back so its not all adding up and increasing the risk of negative equity...


  • Options
    #6
    Snookered
    Registered Users Posts: 43 ✭Snookered


    Acer2009 wrote: »
    If you get interest only for say 12 months and then after this period of time you request your term to be extended by 12 months your repayment will be the same as they are now.

    i.e. If you go on interest only now owing €200K over 35 years in 12 months time you will still owe €200K but it will be recalculated over 34 years. So if you don't want your repayments to increase you will have to get the term extended by what ever interest only period you avail of. (this could result in your life insurance having to be modified).

    Obvioulsy it varies from bank to bank, but I would have thought most would prefer you going on interest only as this means your still paying interest back so its not all adding up and increasing the risk of negative equity...

    Thanks for clearing that up...
    Overall the "Interest Only" still seems to be the better option.
    Going to talk to the bank either today/tomorrow,,, have to do something
    Before the ESB & Gas send the heavies after me ;)
    Will Let you know how I get on.
    Cheers


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