According to the FCA around 1 in 5 UK Mortgages are still Interest only or part interest only, which equates to some 1.5m mortgages in total, so if you Need Help With An Interest Only Mortgage, give us a call.
A lot of these were taken out at a time when self cert mortgages were available with the repayment vehicle being sale of property.
As these mortgages start to come to the end of the term, the question of repaying is coming up. Many people do not want to sell up or can not sell up for various reasons. The aim of this post is to look at some of your potential options.
Remortgage /Extend the term
The obvious choice is to extend the term or remortgage to a new lender who will allow you to carry on. The issue here however could be age, income or credit history. If you are an older applicant, then you may be looking to retire if you have not already. That will have an effect on affordability.
Likewise your credit history may not be great and so that limits your options when looking elsewhere especially if you want to carry on with an Interest only Mortgage.
Switch to repayment
Again, if you are an older borrow, this could be an issue from an affordability point of view. Doing a repayment mortgage over 5 years is going to have significantly higher repayments that one over 25 years. You will have more lenders, but it still have to pass affordability. If you are in your 40s for example, this could be a more viable option than if you were close to or had retired.
Lifetime Mortgages/Equity Release
Depending on your age and the equity in the property, you may be able to look at a Lifetime Mortgage. These mortgages have no repayment requirements (although some do allow you to make interest payments or even overpay to reduce the balance). The older you are or lower your income is, the more likely this is to be your only option of remaining.
Am I a “Mortgage Prisoner”?
This is something that is still very early days, but following a review and some recommendations by the FCA a couple of years ago, it made it difficult for certain applicants to obtain a Mortgage. The FCA are trying to fix that by giving lenders more freedom to help customers who have a history of paying their mortgage but may not be able to evidence they can quite afford it. This gives lenders some remit to be a little more flexible.
So you may find in the coming months/years lenders looking at your history of mortgage repayments to assess your future mortgage and allow you to remain in your home on a similar type of mortgage to your current one. But there is no guarantee lenders will actually move forward with this despite being told they can and at the moment we have not seen any movements in the market.
Need Help With An Interest Only Mortgage and not sure what to do?
Call us. This is our job, we see it regularly and it is something we are seeing more and more and we expect to see significantly more in the coming months and years. It is something that is going to be around for the next 10 years or so to some extent so do not worry, there are potential options and with the governing body trying to make it easier for people in this situation it may be easier than you think. We will have a chat and run through any potential options with you.