woman thing about her interest only mortgageMany people may struggle to repay their interest-only mortgage when it comes to the end of its term.

A large number of interest-only mortgages were sold in the 1990s and early 2000s. They were often linked to endowment savings plans. These plans were designed to generate a tax-free lump sum to repay the mortgage. Some people who took these out found that their monthly premiums needed to increase significantly to reach their savings goal. These shortfalls were often due to the poor performance of the investment funds or they were not paying enough into the policy to start with. Request to increase the contributions by the endowment company were often ignored. The saying of “throwing good money after bad” was often used.

The Financial Conduct Authority (FCA) is concerned, as thousands of interest-only mortgages are coming to an end. As a result, research has shown that around ten per cent of people don’t have a repayment vehicle in place. Many that do, may find that their underlying investment is coming up short.

What are my options?

First of all, a repayment mortgage could be an option. If you do not have a credible repayment plan you could move over to a repayment mortgage. You will need to be aware however that your monthly repayments will increase considerably.

Can I sell my house to repay the mortgage?

Yes, but mortgage lenders are reluctant to agree to this, although some do. You need to ask yourself if you have enough equity in your house to be able to afford a property in an area that you wish to live in and to be able to buy your new house outright. Often, as we become older we get more attached to our homes. This may be because of the memories that it holds or because of the friends we have built up in the surrounding area.

What other options do I have?

Many lenders allow you to overpay your mortgage by up to ten or twenty per cent per annum. Some lenders will allow your mortgage to run until age 89 of the oldest person on the property deeds. So, you may be able to take a tax-free lump sum of up to twenty-five per cent of your pension to repay your mortgage. Also, if you are over the age of fifty-five, equity release may be worth considering.

John Cossons, Mortgage Adviser with Anstee & Co. said-

“Whatever you do, do not put your head in the sand. Your situation will not be unique. Knowing the options and putting a realistic plan together is key. Many of my clients find that it’s a great weight of their minds when they have that plan. Lenders are bringing out new, more flexible products designed to help.”

How Anstee & Co. can help you with your interest-only mortgage.

We are a firm of Independent Financial Advisers (IFA’s). This means that the financial advice we offer is unbiased. We will look at all the financial solutions from the “Whole of Market”. Our Financial Planners are highly qualified and experienced. At the first meeting, they will get to understand you and your financial position before providing any financial advice. Therefore, this first meeting is at our expense and is without obligation.

The meeting can be arranged at your home, office or one of our offices located at: –interest only mortgage call back logo

Also, our financial planners live and make use of meeting rooms in: –

  • Market Harborough, Leicestershire
  • Bedford, Bedfordshire
  • Northampton, Brackley, Wellingborough and Towcester in Northamptonshire.

Finally, to find out more, why not contact us today to arrange a meeting.

As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.