Q I have decided to become a registered childminder – a process that will take up to three months – because my mum is no longer able to look after my 18-month-old daughter and we can't afford the nursery fees. The problem is our mortgage.

Currently, my husband and I have a part repayment and part interest-only mortgage with approximately £30,000 and £235,000 owing respectively. A few months ago we wanted to turn it into a repayment only. Unfortunately, as my present job is a maternity contract we were advised we couldn't apply for a mortgage due to rules brought in after the financial downturn. I had fully intended to look for a full-time permanent job in early 2013 once my contract ended. But this is now not possible.

Is it better to wait a year or more for me to show enough proof of earnings from my childminding business to apply for a repayment mortgage (my husband is on a full-time, permanent contract), or do you think we should overpay our mortgage where we can over the next year to reduce the £30,000 capital? If we do overpay, will this significantly reduce the capital amount? Of the £930 we pay each month to our mortgage provider, only £70-£80 is allocated to the capital amount. FP

A Overpaying your mortgage, as and when you can, would be an excellent idea – and probably your only option. This is because without three years' of proof of earnings from your childminding venture, your earnings are unlikely to be taken account of when applying for a mortgage.

If you do go down the overpayment route, it would be better to pay off the interest-only part of the mortgage rather than the repayment part. By reducing the interest-only part you will cut the amount you need to convert to a repayment mortgage when the time comes.

Virginia Wallis

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source: http://www.guardian.co.uk/money/2012/oct/24/switch-repayment-only-mortgage


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