Oliver Bishton, specialist mortgage adviser from Homeline Mortgages says that prompt action is called for if you still have an interest only mortgage.
In the 80’s there was a huge trend towards selling interest only mortgages where the borrower was expected to have a repayment plan in place, usually an endowment policy, that would pay off the end of term debt. In many cases these investments underperformed, or people did not even set them up, and for the past few years the Financial Conduct Authority (FCA) has been warning that some homeowners may not be able to repay the capital at the end of their mortgage and may risk losing their homes.
So, what can you do if you find yourself in this position?
Oliver said, “The best and most important advice is don’t ignore the problem, you will only make matters worse. You need to speak to someone as soon as possible to discuss your personal situation and to work out the best move forward to prevent a crisis. An independent mortgage adviser can help you work out how much equity you have in your home, what annual household income you will have in coming years and will look at means to mitigate the situation.”
Options may include:
Making overpayments. If you can possibly afford to make overpayments each month you can gradually chip away at the outstanding debt. It is unlikely you will clear it, but the end sum could be significantly reduced.
Switch to a repayment mortgage. Again, you will need professional advice to see if you are eligible to switch to a repayment mortgage. There are many factors to consider such as your age, your income potential, the amount of equity in your property and the outstanding amount on your mortgage.
Switching to a specialist mortgage. Some bespoke lenders have mortgages specifically to address this situation such as a 55 + mortgage or retirement lifestyle booster. Once again you will need to go through this with your adviser.
A mixed plan. In some cases you can have a mixed mortgage plan that includes part repayment and part interest only. As with any mortgage you will need to meet the necessary affordability criteria.
Equity Release. There are now modern mortgages on the market called Lifetime Mortgages which are equity release plans. If your property has significantly risen in value and you want to get cash out of the property without the need to move home, this might be an option to consider.
Downsize. If you have a home that is maybe too big to manage as you get older, you may think of downsizing and either paying off your mortgage in full or taking on a smaller mortgage commitment.
If you would like to discuss an interest only mortgage, talk to the team at Homeline Mortgages. They offer a free initial consultation. A fee may be charged should you proceed with a Mortgage or Protection application. Please ask your adviser for further details.
To book an appointment call 01202 937444 or visit www.homelinemortgages.co.uk
Your home may be repossessed if you do not keep up repayments.