160,000 interest-only mortgages will be ending in 2019-20. And many more families will have interest-only mortgages ending after 2020, with a big peak in numbers in 2027-8 and in 2032.
When an interest-only mortgage ends, you have to repay all the amount you borrowed. The money to repay it can come from three sources:
- savings or investments;
- by getting a new mortgage; or
- by selling your house.
Contents
Find out your options now – even if you are worried about this
If you will have difficulty repaying it when it finishes, you need to review your options and make some decisions as soon as possible.
The longer you leave it, the fewer choices you will have. If you are one of these people without a plan, you are risking having to sell your house or have it repossessed if you can’t repay the mortgage when it ends.
The FCA, which regulates mortgage lenders, has a leaflet explaining why you should act now and talk to your lender – even if you feel nothing can be done to help you. This may feel scary but:
- a lender can’t “cancel” your mortgage before the end date if you say you don’t have a plan to repay it;
- a lender can’t make you move onto a repayment mortgage that you can’t afford.
What probably won’t work…
“I want to carry on with the monthly payments after the end, I can afford them”
Your mortgage contract says you have to repay the full amount at the end. In 2018 the FCA said:
So if you have an interest-only remortgage, you can’t rely on your lender coming up with any options for you at the end, let alone a nice one such as allowing you to carry on making your current monthly mortgage payments.
“I want to get another interest-only mortgage at the end”
A lot of people are hoping for this. But times have changed and it is now very difficult to get a normal interest-only mortgage. Your current lender is very unlikely to offer you this as an option, however much equity you have.
People coming to the end of an interest-only mortgage will probably be well over 50, and many of them will be over 65. If you will be retiring during the new mortgage that you want, it is unlikely you will meet the mortgage affordability criteria unless you have very good pension arrangements.
Many people switched to an interest-only mortgage because they had a lot of other credit card and loan debt. Unless you have cleared your other unsecured debts they will make it harder to get a new mortgage.
“Was my mortgage mis-sold?”
Citizens Advice say “Some of the people who came to [us] said they were not made aware that they would need to repay the capital at the end of their term.” It is possible that in future the regulator or Financial Ombudsman may decide that some of these cases were “mis-sold”.
But this isn’t likely to apply to the majority of cases. Although an interest-only mortgage with no repayment plan is often a long-term disaster, it could have been a sensible option when you took out the mortgage and so it wasn’t mis-sold.
So what can you do now?
Your options for repaying your mortgage at the end include:
- switching to a repayment mortgage with your current lender. This calculator shows how much your monthly payments would increase. If you change the number of years to go, you can see how the longer you leave this, the more the repayments increase.
- switching part of your mortgage to repayment and leaving part on interest-only. This could be a good option if you have other ways of repaying the remaining interest-only part – perhaps you will get a lump sum from your pension when you retire, or you may be planning to downsize, so by switching part to repayment now you know you will be left with enough equity to buy the smaller house with no mortgage.
- paying more into an investment or saving plan each month. This is a riskier approach than paying the extra amount off your mortgage as the value of your investments could fall.
- using savings to reduce the mortgage. If you could repay some of the mortgage now, you may be able to afford the higher monthly payments for a repayment mortgage.
Improve your finances
Making larger repayments now may seem impossible, so also look at ways improve your finances;
- is everyone in the house paying their fair share of the costs? If your partner just pays the electricity bill and does some of the shopping, that’s not a fair contribution. Adult children at home should be paying you some rent, even if they are on benefits or a low income.
- do you have a spare room that you could rent out? Up to £7,500 a year would be tax-free money that you could pay straight off your mortgage.
- look into whether you could reclaim any PPI and do this before August 2019. Some people paid this without even realising! Do this yourself using the free Resolver service which generates all the letters and submits them for you. Don’t use a Claims firm – they don’t get better or faster results and you need every penny you can get back here to pay a chunk off your mortgage.
- look seriously at other ways of cutting your costs or increasing your income.
- if your non-mortgage debts are a big problem, then you need to take some debt advice on your whole situation including your interest-only mortgage: go to your local Citizens Advice or phone StepChange.
Using your pension
If you are expecting to take a 25% tax free lump sum when you retire, using that to repay some or all of an outstanding mortgage is usually a good option.
There are options to take more than 25% of your pension when you are over 55. This may sound like a great solution to your interest-only problem, but taking a lot of money out of your pension could give you a large tax bill. It could also mean that you will be broke when you retire, being “house rich and income poor”. Read Should I use my pension to pay debts? for more about this.
Equity Release – “lifetime mortgages”
Another alternative is equity release. You repay your interest-only mortgage by getting a “lifetime mortgage”. Martin Lewis has a good guide to Equity Release.
It may sound like an easy answer, to your interest-only mortgage ending, but there are major drawbacks. these are not cheap mortgages. Equity release can allow you to stay in your house when you are retired but the costs can mount very steeply.
With a lifetime mortgage you usually don’t have to make any repayments while you’re alive, instead the interest ‘rolls up’ and is added to the amount you borrowed (unpaid interest is added to the loan). But sometimes you can choose to make repayments – perhaps until you retire completely? Doing this will reduce the rate at which your mortgage size increases.
Lifetime mortgages are becoming increasingly common: 83,000 people took an equity release mortgage in 2018. But they won’t be possible for everyone with an interest-only mortgage:
- you have to have a LOT of equity. If you have only 20 or 30%, it isn’t likely to work;
- the older you are the more equity you can release. Many firms quote 55 as the minimum age, but over 70 is more practical. This means both you and your partner, it is the age of the younger one that matters.
Sell the house
If there is a lot of equity in your house and it is larger than you need, or you could move to a cheaper area, you should also consider making this move now, rather than waiting until your mortgage ends.
By moving earlier you will reduce your outgoings on your current mortgage and probably also on other costs such as utilities and council tax. Also if you are going to move areas away from your current circle of friends, this is easier to do the younger you are.
Getting a plan
Often you may need to create a plan that fits your individual situation, taking into account your other commitments, when you are likely to stop work, what your pension arrangements are etc.
A few examples:
- Mr A could decide to convert half hus mortgage to repayment now, which he can afford, and plan to repay the other half from the tax-free lump sum from his pension which he can draw when the mortgage ends.
- Mr and Mrs B have an expensive car loan which has three more years to run. When that ends, they can start overpaying their mortgage by several hundred pounds a month. This will increase the equity in their property by enough that by 2028 when their mortgage ends they should be able to get a lifetime mortgage.
- Ms C wants to stay in her current house as it’s convenient for her work, but will move to a cheaper area when she retires. She will still need a mortgage at that point, but she can make this smaller by getting a lodger for the next few years until she retires and using the money to overpay her current mortgage.
You may not be able to come up with a plan that will completely solve your problem, but it will still usually be best to do what you can now. So if you can only afford to move part of your mortgage to repayment now, doing that means you will be in a better position later to tackle the remain interest-only part. With more equity in your property because you have been paying it off, more options such as equity release may become possible.
Once you have a plan, it’s a good idea to do an annual check that it is “on track”. If at any point you can overpay your mortgage, this may help later if mortgage rates increase.
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mike says
What about taking a mortgage company to task for allowing interest only mortgages to desperate people
I had to take one out 20 years ago to consolidate debts and now face eviction coz I stupidly believed the company would let me change to repayment which they wouldn’t allow
Sara (Debt Camel) says
Well you can try … but you are unlikely to get very far. You knew what you were being sold. You could always have remortgaged with a different lender. Or just saved up the extra payments you would have been making in a repayment mortgage for a few years and then remortgaged elsewhere with your larger deposit.
mike says
Sorry, I disagree, especially with your “saved up the extra payments” comment. I could only afford an interest only so no way could I afford extra payments. And I couldn’t remortgage as I couldn’t pass the repayment affordability test!
And, Ok, yes, I knew what I was being sold, but so did all the people that applied for a payday loan!
What’s the difference?
Sara (Debt Camel) says
As I said, you can try… But the crucial thing about the FOS decision you linked to is that the customer there had stated clearly that she wanted a repayment mortgage.
And the difference with payday loan affordability complaint is that the repayments on the payday loans were not affordable. But the repayments on your IO mortgage were affordable. The question with an IO mortgage is very different – not whether the product was affordable (it was) but whether it was suitable.
S. Evans says
Hi
I went on an interest only a few years ago as we were struggling with payments. I am 48 and my mortgage ends in 8 years. I have just finished a dmp. My mortgage is £120,000 and the value of my house is approx £145,000. Myself and partner are due to retire at 55 years and our pension lump some will not cover the outstanding mortgage. What would be our best option. We have spoken about selling up and renting a smaller property but This has been our family home for over 20 years but all the children have grown up and moved out.
Sara (Debt Camel) says
If you have just finished a DMP, can you start using the money that was going to that to pay to the mortgage? Was their any PPI on any of your debts – reclaim that and pay it off the mortgage. Rent out a spare room for a few years?
If you put ALL of these ideas together with your pension lump sum you maybe able to repay the mortgage in full? Or repay enough to let you sell and buy a smaller place?
Martin Fullard says
I have a interest only Morgage of 177 000 and have just received 100000 can I pay this off the interest only Morgage
Sara (Debt Camel) says
You need to ask the mortgage lender. If they say no, you can only repay the full mortgage, you could look at getting a repayment mortgage for 77k from a different lender and use that pus your 100k to settle the mortgage.
Patrick. Hart says
I am 70 in September and my interest only mortgage is due in Sept £100000 due you think the bank would extend my mortgage by one year and I no that I could pay of the full amount then but would stuggle this year
Sara (Debt Camel) says
I would expect that a mortgage company would listen to your reason for wanting this and any evidence that you will be able to repay it in the next year.
Patrick Hart says
I did speak to my mortgage company and they were helpful they have given me 1 more year so I’m thinking about equity release to pay it of with a life time mortgage
Elaine says
Our mortgage is due to end in 5 years, I am paying extra each month, currently owe £134000. I am 52 and my husband is 60. We are no longer together, I am the major wage earner and divorce is likely. What does this mean for the mortgage, could I remortgage on my own over a longer period, finances permitting?
Sara (Debt Camel) says
How much is it worth?
Elaine says
It’s worth £330,000
Sara (Debt Camel) says
So there is about 200k of equity. In a divorce your ex would often get half of that, so you would have to remortgage for 230k to be able to buy him out. I think you need to talk to a solicitor about this ASAP. You may be advised to stop overpaying the mortgage and save up the extra money separately, as verpaying is just increasing the equity.but I am not a divorce expert and you should NOT rely on this, please get professional help.
Elaine says
Thank you, much appreciated.
Mark says
I have an interest only mortgage that finishes in 10 years, The mortgage and house are joint with my ex wife although I make the monthly payments and live in the property. I have no vehicle in place to repay the mortgage when it is due and am disabled and unable to work, I am unsure of what to do or how to go about repaying the mortgage when due as selling the property would leave me homeless – mortgage is 110000 and house value is approx 130000 – I am 53
Sara (Debt Camel) says
Have you read the “So what can you do now?” section in the article above?
Mark says
Hi yes I have read them, I will contact my mortgage company company, just thought I would see if anyone had come across the same situation
Sara (Debt Camel) says
The situation is common, but what works for different people can be very different. Some people don’t have a spare room for example.
Rachael Pickin says
Can you possibly tell me, where we stand please. When we went for our mortgage 13.5 years ago, my husband was working full time, we didn’t have very good credit history and were advised to get a interest only mortgage with a lesser company. My husband is now unable to work as I am disabled and we have 2 autistic sons, so have to claim benefits. We have just over 11 years on our mortgage, no savings and no way of paying off the outstanding balance at the end of the mortgage. The lenders are not easy to talk to, as don’t appear to speak great English and don’t seem to understand our concerns. We borrowed £79.000 and house is worth around £100.000. Would somehow manage if they were to give us a repayment mortgage, but don’t get anywhere on trying to speak with the mortagage company?
Sara (Debt Camel) says
Who is the lender? What interest rate are you paying? What is your current credit record like and how much other debt do you two have?
Beryl says
My husband and I have an IO mortgage for £55k coming up for repayment in 2021, I’m 55 & in part time work my husband’s 63 and in full time work, he can work for as long as he wants and wants to work till he’s 70, we have equity of about 50-60k in the property, what are our options, I would like to to remortgage but husband thinks he’s to old, we have no other debts except 2k on a credit card.
Joint earnings are around £25k, husband has a private pension of £250 pm, equity in house about £50/60k, could pay around £400 to £500pm.
Sara (Debt Camel) says
You should talk to your current lender about your options such as extending your mortgage and moving some or all of it onto a repayment basis. Don’t wait until 2021. If your mortgage lender isn’t helpful, talk to a mortgage broker.
Margaret says
I have an IO mortgage of £91000 with 11 years left to pay with no plan. I went through with my bank an option to change to repayment but they didn’t except me. Can I pay extra each month and will it reduce the debt and not just the interest. It was originally a repayment mortgage but when I couldn’t afford the payments the bank suggested I switch to an interest only.
Sara (Debt Camel) says
I’ve looked at the various options you may have in this new article: https://debtcamel.co.uk/overpay-interest-only-mortgage/
John says
My intest only Mortgage has ran out I’m so worried that I will now loose the house because I’m disabled now and don’t work
Michelle says
Our interest only mortgage is coming to a end, it’s only £45000 owing but due to circumstances out of our control we had a bad patch and now don’t have this to pay, i’m Scared of going to the lender as i’m Not sure what the outcome would be, any suggestions of what we could do?
Sara (Debt Camel) says
When is it ending? How old are you both?
Ad says
Hi there, My partner has an interest only mortgage that we simply can’t pay in time. We have 9 years left and my name isn’t on the mortgage.
We are getting married and I wondered if it will change anything?
And also do you think lenders would lend based on her wage and my age even though I really don’t earn much? We are scared to call them to discuss like in a lot of cases as even though they can’t cancel your mortgage they can indeed change things and make things even more difficult.
Thankyou
Sara (Debt Camel) says
Getting married doesn’t change anything. The mortgage and the house are still in her name.
“do you think lenders would lend based on her wage and my age even though I really don’t earn much?” Her age affects when she will retire. If you are younger, you retire later. What matters is whether you will be able to pay a mortgage now, when she retires and then when you are both retired.
With 9 years to go, can you make larger payments than you are currently doing? This may not repay the mortgage in full, but will give you much better options at the end of the mortgage.
Could you increase your income? Will your partner get a lump sum when she retires? Have you looked at PPI reclaims? Do you have a spare room you could let out? You need to be looking at all your options.
milo says
I’ve been contacted by a solicitors that say I have a claim for mortgage mis-selling on the interest only mortgage as above.
Apparently it’s something to do with the amount of savings needed to pay off the capital that we should have made every month, would have made the total monthly payments unaffordable.
The also feel I have several other good arguments.
Sara (Debt Camel) says
I assume this letter is out of the blue and is very general – it doesn’t say anything very specific about your mortgage.
Various firms are trying to win these cases. To date I am not aware of any that have had much success. The problem is that there was usually a good reason why you wanted an IO mortgage at the time you took it out or switched to it – the rules have now changed so you probably couldn’t get that mortgage now, but that doesn’t mean the lender broke the rules that were in place when your mortgage started.
Now obviously I am not a lawyer and I don’t know the details of your case. I have no idea what your situation was and what the “other good arguments” might be. This firm may have some very clever legal idea … or it could just be a fishing expedition to try to reel in as many clients as possible, send off a letters for each and hope a couple of them get something back.
If you think this is worth exploring, I suggest you:
– check the letter really does come from solicitors. Their website should give an SRA number, check it here: http://www.sra.org.uk/consumers/using-solicitor/find-solicitor.page
– ask them how many cases they have won against your mortgage lender and what the “awards” have been in each of these cases
– get in writing what their fees would be, something clear which states these are the ONLY fees you will be cahrged
– do not agree to pay ANY money until the case has been won
– think about how you could pay their fees if the “win” in your case just reduced your mortgage by an amount, so you don’t have any cash refund with which to pay the solicitors.
And, most importantly, do not pin all your hopes on this working. Read https://debtcamel.co.uk/interest-only-mortgage/ and think what other practical steps you can take to improve your situation.
Marion says
Hi, we have an interest only mortgage of £400,000 which is due to come to an end at the end of 2018. My husband will be 70 then and I will be 65. The only way we could repay it is by selling the property and trading down. From what I have read this seems our only option as the property will probably be worth somewhere in the region of £600,000. We don’t have any maturing endowments and only a small private pension. Would you agree or is there another option?
Sara (Debt Camel) says
The article above looks at a general range of options. You could ask about equity release but I would be surprised if you could borrow 400k. None of the other options seems likely to make a big dent in 400k by the end of this year.
Trading down to a smaller property or in a cheaper area (or both) may well be your best option. In many ways this is a good time to move house – having seen my parents and in-laws struggle with health problems and unsuitable houses in their 80s, I wish they had taken the difficult decisions to downsize at your ages.
Marion says
Thank you for your advice, I know it makes sense to sell but I just can’t get my head around it yet. The time to do it is when we are in good health, even if it is forced upon us.
Syeda says
Hey,
My father has a interest only mortgage and it’s due to end in 2 years by that time my dad will be state remitrement age and can no longer get an mortgage extension or apply for a new one .
£70,000 is remaining to be paid and the house value is 120k.
I am his daughter and I am willing to help in whatever way is possible.
However my income is low around 17K what are the options to keep the house under my fathers name?
Sara (Debt Camel) says
Are you living in the house with him?
ROSALIND HAFEZ says
Hi, my husband and I have an interest only mortgage of £159000, house is valued at £320k. I am 65. he is 40-both work on permanent contracts, him 35 hours, me 14 hours on nights. I have pensions in pay guaranteeing £1583 p m and with my wage takes it up to £2000+, he brings in £1100 +. Halifax have said they cannot help us, and have sent us to StepChange dent Charity whose max debt they deal with is £50k. I have an inheritance coming when my mother passes (91, advanced dementia and in a nursing home, her house is rented out) our house has been up for sale for 6 months and no luck. Help!!
Sara (Debt Camel) says
Do you have other debt apart from your mortgage (loans, credit card, catalogues, overdrafts, car finance etc)?
Your mum’s house – is the rent covering the care home fees, or is there going to be a bill for car home costs when she dies?
Richard Lockyer says
Hi Sara
I have an interest only mortgage on a buy to let property and when the mortgage finishes in 10 years time I will have a £40,000 shortfall. If they repossess the property and it goes to auction can they seize my residentual property to make up any shortfall?
I’m afraid that I was very foolish when I bought the property but I didn’t realise what I was getting into
regards
Richard
Sara (Debt Camel) says
oh dear, that is a huge shortfall – I suppose it may get less if house prices go up. Is the rent on the BTL more than the cost of the mortgage and other expenses? How much equity do you have in your own house? I hope that is on a repayment mortgage?
Richard Lockyer says
Yes I bought at a peak time and it has gone down dramatically since then.
I make a very small profit on it after all expenses are paid.
Currently I have about 200,000 equity in my residential home and that is on a repayment mortgage
regards
Richard
Sara (Debt Camel) says
Not sure what you can do except hang on and hope the property market improves. If there is a shortfall at the end (which you are obviously expecting) that is then an unsecured debt – you could presumably remortgage your current house to clear it or you will need to make arrangements to pay it off monthly. If you ignore it, it is pretty likely the creditor will go to court for a CCJ and a charge on your house.
Richard Lockyer says
Does a charge on my house mean that If I ever sold it they could claim part of the proceeds to pay off the debt that I have with them?
Sara (Debt Camel) says
if there is a charge on your house then it is like a second mortgage, it would be repaid when the house was sold. Also in theory the creditor could go for an order for sale, but that’s very rare and wouldn’t be granted if you keep up with the monthly repayments ordered with the CCJ, see https://debtcamel.co.uk/charging-order-sale/. Bottom line, this debt isn’t going to go away.
Willaim says
Hi Sara
I have a couple of dozen buy to lets all bought interest only between 2003-2008 and no hope of paying off the nearly £2M in debt by the time they expire. They’re virtually all low or negative equity so selling isn’t really an option (without having to pay a lot of shortfall) and I can’t really go onto repayment mortgages as they’re barely washing their face as it is with repairs and so on. If I could wave a magic wand and make them disappear I would but just worried about how this is going to affect my family when they expire. Do you have any ideas to mitigate the damage? Appreciate any advice you can give.
Thanks
Sara (Debt Camel) says
Apart fro the BTLs do you have other assets, eg equity in your own property? How old are you?
james says
Sara
I am 62, interest only mortgage.
Total outstanding amount £224000, house value £920,000
I just sold my business and probably will not work again.
£110,000 is due for repayment to the bank in May 2020
A further £54000 is due to be repaid in May 2022
The rest in May 2023
I intend to sell it in 2022 and downsize. The pot left over will be my pension together with a full state pension in 2023, the house is in the South East and has good growth potential until that date.
I have a pot of money in the bank of about £150,000 plus £20,000 due to be repaid to me from a company over the next two years and so I will be able to continue to pay my mortgage of £460 a month from the pot of money even if interest rates go up to 5% as the ‘net income’ from the pot of money is equivalent to £3500 per month until the end of 2022
How likely is it my bank will take into account the lump sum and extend all the portions of my interest only loan to all expire at the same time in May 2023?
Regards
James
Sara (Debt Camel) says
Why can’t you just pay off the 110,000 loan now? Then you will have plenty of money left to make the IO repayments on the last 54k and live on, surely?
james says
Thank you for your reply.
Paying off 110k will only leave me with 60k left to last me four years, that is only 15k a year, minus expenses etc and so I would have to live on next to nothing.
Plus my son is going to medical school this year and I will want to help him.
What is your estimate of the chances of the bank extending the mortgage term as above ?
Sara (Debt Camel) says
Well you could try. But with no income, just running down capital, why would a bank want to do that? You could get a job, even a part time one. Or a lodger. Or downsize now. Lots of options. Also your son is likely to get more financial support if you don’t have so much money in the bank, so using it to clear the first mortgage helps there.
james says
Sara,
I did speak to the bank re the mortgage, they told me to contact them on the day the first part of my mortgage is due for repayment as a whole lump sum which is May 2020.
As I will not have an income at the time I will not be able to get a remortgage they told me, I said I can pay them five years of mortgage payments in advance from what I have in the bank, they said no as it has to be based on income.
I said the cash is there in the bank, if it was based on income I could easily be made redundant or become sick etc, I said an advance payment is paid, the computer said ‘no’.
I asked them why should I leave it so late and be backed into a corner.
They said they will then give me six months to get the house in order if necessary and put it on the market.
A further one year will then be allocated for the sale, so in affect they would give me 18 months to sell from the end of the due date before they started proceedings to repossess, houses sell quickly in this area and are in demand but of course we can not predict the future market especially during this Brexit situation.
But I will look at the situation in may 2019 and then see if I should put it on the market then thus giving me 2.5 yers to sell in affect.
Thanks for your help.
james says
Sara
Thanks you have given me a lot of help. I will get information on all possibilities when I phone the bank next week and see what is on offer then decide the best path to take.
Regards
James
Sara (Debt Camel) says
Good plan – find out your options.
Ann says
I have a £200.000 interest only Morgage that expired 12 months ago the lender gave me an extension of 12 months however they are now threatening. Me with court action and repossession.
I have had my house up for sale for 2 years I have had 3 buyers and all have fell through my house is valued at ££400.000 Can the bank repossess
My house when I have tried everything possible to sell my home.
I am 67 years old and no private pension.
Any advise would be greatly appreciated
Sara (Debt Camel) says
Yes the lender can go for repossession – they have to go through various steps before they do, if you want to know how far through this process they are, the Shelter helpline is good https://england.shelter.org.uk/get_help/helpline. You can ask the court to suspend the repossession order if you are in the process of selling the house, but this would be easier if the house was under offer.
Is the price realistic? Why have the sales fallen through? Have you done all the obvious clean / declutter things to help the house sell?
Ann says
Thanks for your reply,
I have my house on the market for below the market price and I have also reduced it, the previous sales fell through due to one buyer not getting a Morgage and the others changing there minds.
The house is in very good order and well looked after,so not sure what else I can do.
Lynne Mary Pugh says
Hi there, I’ve just discovered this website and been reading through your advice. I wonder if you could help me. I have an interest only mortgage of 192000 with 7 years left until I have to repay the lump sum. I have already resolved to sell my property and move to a cheaper area. My property is worth approx 500000 (haven’t had a proper valuation yet). Could you advise how near to the end of the 7 years should I do this?
Sara (Debt Camel) says
I think a lot of this depends on how much you mind moving! Because if you will be just as happy somewhere else, then the sooner you move, the sooner you can stop paying the mortgage and put down roots in a new area. But if there is a good reason why you want to stay as long as possible, then it depends how much you want to try to maximise the sale price. You could put it on the market a year or so before at an optimistic price and accept you will later reduce that if it doesn’t sell? leaving it until the last minute may mean you have to accept a lower offer than you think it is worth.
Lynne Mary Pugh says
Than you for your reply, it has given me more of an idea of when to try and sell my property.
Paul says
My interest only mortgage is up very shortly, the independent mortgage shop (not real name) put an unrealistic term of 12 years on it, I had no idea it all had to be repaid in 12 years. I have been overpaying the last 2 years to get it down as it was and still is in negative equity after only a couple of years of owning it. As it is negative they wont let me change the mortgage to repayment based on my salary or combined salary of my wife (I wasn’t married at the time). We are only late 30s early 40s. I want to repay them and will do by overpaying as I have the last couple of year. what are my options?
Sara (Debt Camel) says
how large is the mortgage, how much negative equity is there and do you have other debts as well?
Paul says
Sara,
there is 73K owed on the house from the original 90 which I’ve done in two years of overpayments, the negative equity is approx. 13k. I asked to change to repayment, combined salary of over 52k but the answer was no based on the equity problem. We have no other debt at all.
Anna says
We have a 183,000 interest only mortgage which will end in 2022. The house is now worth in excess of 450,000 but no one will give us another IO mortgage for 10 years which is when we really want to sell. I cant understand why? we have 300,000 equity. We are in our 50;s and early 60,s but both work with no intention of retiring yet. Additionally our other debts are minimal (under 10,000) It seems insane!
Sara (Debt Camel) says
Are you trying to remortgage now? Or wanting to in 2022? Can you make overpayments now for the next 3/4 years to get the mortgage down by the time it ends?
anna says
We have spent the last three or four months trying to do it now. No one will touch us and we simply can’t afford to make any significant dent
Neil Paxman says
Hi
We have a mainly interest only mortgage with Nationwide with an outstanding balance of £106,000. It ends in October 2021. I am 67 and my wife is 63. The house is currently valued at around £225,000. Is an equity release product suitable to explore? We are both still working, but net monthly income is around £2,200, so no chance of repaying the loan. We also have a couple of loans outstanding with about £20,000.
Any advice would be appreciated.
Sara (Debt Camel) says
Equity release may be an option for you – if not now, in two and a half years when your mortgage ends and you will both be a bit older.
You could decide to talk to an equity release firm now to see what they think? I wouldn’t want to pay any fees at this point…
Obviously you can’t repay the whole mortgage in the remaining time, but it would be a very good idea to try to clear as much of the unsecured loans as possible. Don’t use any more credit! And do look at what you could do to get some more income over the next couple of years – is renting a room out a possibility?
Neil Paxman says
Hi
Many thanks. I have thought about approaching an equity release specialist, but the pool is full of sharks and it’s hard to work out who is legit. My lender keeps nagging (understandably) for us to remortgage, but the chances of Nationwide extending the mortgage if we make an official request is probably negligible, even with our ‘outstanding’ credit rating. As you say, the loans are an issue and will be mostly repaid by 2021. I think I’ll wait until next year, then try the ER route.
Thanks again
Sara (Debt Camel) says
Well there is no harm in talking to Nationwide now. They can’t make you do anything you don’t want to.
douglas k says
IF amortgage contract is for TEN years and it comes to an end (i.e.Contract finishes) what gives the right to banks.b/societys to charge monthly
interest payments on capital that was not paid just owqing
Sara (Debt Camel) says
If you want help to look at your mortgage Terms & Conditions, I suggest you go to your local Citizens Advice or a Law Centre.
As a matter of practicality, if you need to time to sell the property or make other arrangements to repay the mortgage, the lender will be slower to repossess the property if you are making monthly interest payments.
Ben L says
Hi Sara, I have a 180k IO mortgage, plus 9k repayment, with just short of 10 years to run. I had to convert from repayment about 10 years ago due to a relationship break-up & have never been able to afford to get back to repayment since. My house is worth £260k on paper (according to the Halifax) but would probably sell at around £245k . I don’t have a repayment vehicle. What would your advice be please? Thanks. Ben
Sara (Debt Camel) says
Nearly 10 years is a good length of time to start chipping away at the mortgage, even if you can’t clear it. Have you read the “So what can you do now” and “Getting a plan” sections in the article above?
B Lourie says
Thanks for the reply Sara, do you mean as in making overpayments? Will check out those sections now.
brian says
My interestonly mortgage came to to end Feb
my mortgage is with spml they are not very helpful all they is seek legal advice and have a plan in place to pay it back.
They say they can only extend for six months
we borrowed 95.000 and my house is worth 130.000 so equity release is not suitable.
Sara (Debt Camel) says
You are going to have to say some more for me to be able to suggest what to look at. How old are you both? Are you both working? Could you afford a repayment mortgage for 95k? Do you have a lot of other debts? Anything else that is relevant to your situation?
Claire Davies says
Hi,
Interest only mortgage finishing imminently. Only income now is State Pension and therefore no way of paying off the outstanding balance. No debts or any other lending, just this interest only mortgage. I understand that the property would now need to be sole, or an equity release situation. Can you please advise as to whether the lender would repossess the property on the date that the current mortgage product expires or would a certain amount of time be granted after that time in which to sell the house?
Sara (Debt Camel) says
They aren’t going to go to court the day your mortgage ends. If the house is on the market then most lenders would rather you got on and sold it than think about repossession.
Gemma says
Hi, does anyone have any advice on getting your name off a morgage with an ex husband? We have been seperated over 6 years i moved out of the family home and now currently privately rent but in an ideal world would like my own morgage. My ex took over payments of the house and i have nothing more to do with it, This morgage is interest only and has gone down in value loosing approx 20k. The morgage company have quoted practically double the morgage payment per month to change this to a buy to let morgage which i have been told is good enough for me to be able to get one but my ex cannot afford these payments and rent would not cover this. My name cannot be taken off as his salary wouldnt cover it, and the morgage company will not allow us to sell the house with a loss. To change this to a repayment morgage is also double the morgage payment per month.. the morgage company are very blunt and not helpful and i feel like i could be stuck until house prices IF EVER go back up again.. any advice would be greatly appreciated
Sara (Debt Camel) says
Is your ex happy to sell? how much negative equity is there?
Gemma says
He is happy to sell, the morgage is 181K and the house is valued between 163K-175K
Phillip Wright says
I have an interest only mortgage due to end in 5 years I owe £120,000, the property is worth £140,000. The original mortgage was taken out with Preferred Mortgages but was sold to Acenden when Lehman Bros went bust. I want to convert to a repayment mortgage but Acenden are telling me they are just the collectors of the mortgage now and cannot change anything about the mortgage, no extension and no repayment mortgage. They have told me that if the total amount is not paid at the end of the term they will repossess the property. Can they do this?
Sara (Debt Camel) says
Can you afford the repayments on a repayment mortgage that will end in 5 years?
or do you want a repayment mortgage over a longer term? how long is it until you retire?
Phillip W says
Would like repayment over 10 years. Planning to retire when I am 70 years.
Sara (Debt Camel) says
Have you talked to another mortgage lender about this? If they will offer you the mortgage you want, then you can repay the current one.
Phillip W says
I am in the process of doing this but it will be over 10 years. My point was that Acenden will not help with this as they bought the original mortgage from Preferred and no longer offer mortgages just collect from bought ones so I can’t get an extension with them. I will downsize with a smaller mortgage over 10 years and sell the existing house as soon as possible.
Sara (Debt Camel) says
yes, you aren’t going to get offered a longer mortgage by your current lender. Finding an alternative lender is a good idea.
Gill says
Hi Sara
My interest only mortgage is up for redemption at the end of this month. The value of my house is approx £225,000 and I still owe £18,000 which I don’t have. I have been paying approx £200 a month off what I owe. What would happen if I just continued to pay that amount after the redemption date. Could they still take me to court or repossess my house even if I’m making regular payments
Sara (Debt Camel) says
Yes they could – but a lender will normally be slow to do so. Have you looked at getting a small mortgage or secured loan to cover the balance? Who is the lender?
Also have you looked at things like reclaiming any PPI – any lump sums you get can come straight off the mortgage!
Patsy says
I have interest only mortgage. I borrowed £140,000 and just pay the interest. If I pay off the £140,00 will the interest payments stope?
Sara (Debt Camel) says
Basically yes. If you are on a fixed rate there may be some penalty if you repay it early. Ask the lender what the settlement figure would be.
Andy says
Hello, I am in a situation where I owe about £110,000 on an interest only mortgage which finishes in 3 months.
I am over 70 yrs old and can’t get a mortgage due to being retired and my age.
I don’t think I will be able to go on a repayment one so want to understand my options.
I am currently looking at raising capital but might be 20k – 30k short.
The house is worth approximately 400k but we haven’t been able to sell it at present as it needs work and my wife has a long-standing illness, which would be mad worse by moving.
I have a private pension, plus both myself and my wife get a state pension. What options do I have and are there companies such as stepchange who can help with this?
Is there any equity release options or maybe relinquish full ownership of the house ie so when we pass away the bank gets 50% or more of the total sale of house?
The equity in the house is 60-80% so there is plenty there but the issue is we need to repay the money in the next 2 months.
Please let me know options asap
Sara (Debt Camel) says
How are you proposing to raise capital?
Deborah says
My tracker mortgage (I think about 12 years ago) came to an end and a broker sought a new arrangement for me. The Bank of Scotland were the only lenders willing to make an offer – so I was told – but they insisted it had to be interest only on the grounds of affordability. The broker told me that was my only option. I doubt I could repay the full amount in three years time but plan to move soon to a more affordable area anyway but wonder if I have any recourse here.
Sara (Debt Camel) says
Was your tracker mortgage interest only?
Ana says
My interest only mortgage of 90k is up end of October. House value approx 170k This year I have reduced this down to 50k from savings. I will be able to further reduce it to 30k in October. I am 64 and am now retired. Will I be able to switch the 30k to a repayment mortgage over 10 years with current lender?
Sara (Debt Camel) says
I suggest you ask your lender now. If they say yes, that will reduce your stress. if they say no, then you can start to look for alternative lenders.
Ana says
Do you think I am better to ask for an extension on to the current mortgage for a further 2 years. And then I will be happy to sell and clear mortgage. I have very little income at the moment. But will get my state pension as a top up in 2 years
Sara (Debt Camel) says
If you have very little income, how are you managing to pay off large chunks? I am sorry but the answer to your question is that it will depend on who your current lender is and what options they would be happy with. But if you have very little income now, you may struggle.
Ana says
The chunks came from investments put in place when mortgage was taken out and from retirement pension lump sum
Karen says
Hi
We have an IO mortgage due up in 6 years
£75000 mortgage
£20000 secured loan
Property valued at £50,000 :(
I am trying to put away £300 a month which would pay off the loan, would it be possible to use one of these negative equity debt write off company’s at the end don the mortgage term who agree a lump sum payment of about 10-20% of the outstanding balance of then mortgage to avoid bankruptcy?
The mortgage is joint with my mum who is 62, im 42 and I don’t think I’ll get a mortgage on the house because of the negative equity
The loan is due for payment 5 years after the mortgage is due but as the house will be repossessed I think this will be called in at the same time. The mortgage and loan payments are £330 for both (overall total).
My thoughts are, if I pay an extra £300 per month off the loan and try and sell the property or let it be taken but make an arrangement on the shortfall? Then I would have cleared the loan and only have maybe £20k shortfall on mortgage if we do some modifications on the property in the meantime as it looks like we might get around £65k for the property after speaking with a valued today
Thanks
Karen k says
We want to avoid bankruptcy though if possible as it will effect my job and I am on the mortgage and loan. What I am trying to avoid is my whole salary being eaten up by the payment you have to make monthly for 3 years to the OR after a bankruptcy. I am also worried that both of us may struggle to get rental properties with bankruptcy looming.
Sara (Debt Camel) says
Well your whole salary is going to be eaten up repaying this secured loan, isn’t it? And there is absolutely no guarantee you will be able to save up and then get the mortage written off with a low payments. “one of these negative equity debt write off company’s” is quite likely to prove to be an IVA firm that will then expect you to make large payments for 6 years.
Sorry you need someone to look at all the options. It’s going to depend on what other debts you and your mum have. And what her pension arrangements are like. But the idea of you being able to pay off the secured loan, do up the place and sell it may well be fantasy land…
Karen says
If I put away £275 for 6 years the loan is paid off. This seems better than having my whole monthly salary taken by a bankruptcy as there are no other debts. Then if the property is sold at the end leaving a balance of £10-15,000 then I would hope the mortgage company would agree to a payment plan to pay this off. I feel this is quite realistic. She doesn’t have a pension in place sadly and I worry about how hard it would be to find two rental properties with a bankruptcy
Sara (Debt Camel) says
That sounds a reasonable plan, it was your reference to “one of these negative equity debt write off company’s at the end don the mortgage term who agree a lump sum payment of about 10-20% of the outstanding balance of then mortgage to avoid bankruptcy?” that rang a lot of alarm bells – those companies are mostly either scams or people trying to sell you an IVA.
But why would you need two rentals if you are happy living together? And if you aren’t, then your plan isn’t likely to work for the 6 years it is needed,
Karen says
Hi Sara, yes I had a look into them companies and quite right as you say – not with getting involved in.
I think the plan would work so long as I’m strict with myself on saving. I only moved in with mum whilst my rental was sold so was only ever short term but for the foreseeable it works well as I can save a little more :)
Terry says
Hi There, It was originally a repayment mortgage but when I couldn’t afford the payments I phoned the bank asking to switch to an interest only 11 years ago. The bank is HSBC, the outstanding balance is 210,000. I have 11 years more to pay off my mortgage. Since the bank did not look into my means of paying back my outstanding mortgage at the end of the mortgage term, am I entitled to some sort of compensations? I appreciate any help on this issue.
Sara (Debt Camel) says
what would have happened if you hadn’t switched to an IO mortgage? if the repayment was unaffordable, surely you would have got arrears and lost your house?
Sara (Debt Camel) says
How much more can you pay a month at the moment?
Sid Cowans says
I have an IO mortgage of 188,000 due to be paid off in December 2020 and no funds set aside to pay this. We initially were sold an Endowment to cover the capital but that bombed really badly at a bad time for us so we were left with a loose plan to sell the property and move into rental at the end of the term. However, we would now rather do whatever we can (if anything) to stay put at least for another five years (preferably longer) while “adult” kids make their way out of the family home !
We estimate the house is worth around £330,000. My age is 59, my wife 56 and we have both taken early private pensions to supplement income. We will have no other debts of significance beyond the end of this year.
What we would like to do is extend our current IO mortgage with Santander but, although they were not unsympathetic when we discussed with them, they would not agree anything because they advised they had a “special unit” for dealing with such scenarios BUT that unit will not talk to us until six months before repayment date which means waiting until next June.
Do you believe they may offer help or are we wasting time waiting until that point. Alternatively, some brokers on other pages have suggested (to others) that obtaining a new IO mortgage, possibly based on a maximum of c.50% LTV, is achievable elsewhere even for those approaching or even in retirement ….. is that the case ?
Nadia Hussain says
Hi Sara,
I’m hoping you can help,
My mum has an interest only with a balance of over £141k, she is disabled and has very poor health and has been unable to work there fore only relies on benefits as her income which don’t stretch very far so she hasn’t paid her monthly subscription for over 6 months. She has no saving or endowment and I very much doubt she can get another mortgage. She really wants to live in the house as it has huge sentiment for her. The term has ended this summer gone. However I think the property is in negative equity, by atleast 25k due to condition etc . So if she sells it lower than the balance of the mortgage will the lender allow her to sell?
By the way she was not aware her mortgage was interest only when it was sold, there was no plan and only found out a couple of years ago.
Please help as you can imagine she is very very worried
Sara (Debt Camel) says
To point out the obvious, if she hasn’t paid the mortgage for 6 months, she can’t possafford to stay there. I suggest she goes to her local Citizens Advice and talks about her benefits and what her housing options are.
Nadia says
Yes that’s why she reluctantly wants/ has to sell. But she is in negative equity and doesn’t know how to deal with it, with the sale of the property.
Sara (Debt Camel) says
Where is she going to move to? Does she have other debts as well?
Nadia says
Council tax arrears which she is paying a payment plan, she will have to move in with her mother until she gets council accommodation.
Elaine says
We have IO mortgage which end in 2021 of £100000, property is worth £360000. We was thinking of getting a secured loan to pay of the £100000 now over 7 years – is this a good idea?
Jill Green says
I am in an interest only mortgage with an ex partner who I’ve been separated from for around 10 years I’ve made all the payments on the mortgage since he left. The mortgage is due to come to an end next year & I’ve tried to contact him but he will not cooperate at all even though he could end up with some equity. How do I stand if he won’t cooperate? Obviously I can’t do anything without him agreeing.. I have twin boys to him that still live at home with me but he doesn’t have anything to do with them either. Last year I tried to contact him because I had a lot of debt so wanted to release some equity to pay off my debt, but he wouldn’t respond so I ended up doing an IVA. Is there anything I can do? Ideally I would like to buy him out & remortgage to a paying mortgage releasing equity to pay off my outstanding debt so I can come out of the IVA. I would like to stay in the house because my sons still live at home even though they are 18.
Sara (Debt Camel) says
What does your IVA say will happen when your mortgage ends? I suggest you should speak to a solicitor about a divorce and your options about the house- I am not sure why you have left this for so long. I hope your adult children are paying you rent.
Jill Green says
Hi
I’m not married I was just in a relationship with the kids dad. I’ve only left it this long because I could only afford to pay an interest only mortgage & didn’t want to lose the house. The IVA says I will have to pay my share of the equity towards my debt which I’m fine about, but the issue is he won’t cooperate so how do I move forwards. One of the twins is still in full time education & the other is suffering with anxiety at the minute & is currently on sickness benefit.
Thank you
Sara (Debt Camel) says
So how much equity is there? And how large are the debts in your IVA? Can you now afford to pay a repayment mortgage?
Jill Green says
I’m not sure how much equity there is but a house across from us is up for sale for £190k same size has mine. My outstanding mortgage is £110k I’ve also done some home improvements on the house. I’m currently paying £300 a month on my IVA & £280 on my current mortgage so there is £580 a month there so yes I’m confident I can afford a repayment mortgage now just don’t know how to move forward.
Thanks
Sara (Debt Camel) says
But how large are the debts in your IVA? Your IVA company is likely to want you to repay these debt in full, not just make the rest of the monthly IVA payments if you remortgage. And getting a mortgage when you are in an IVA is usually impossible except at a very high rate.
Jill Green says
Aww sorry my debts are £30k, but like I said I’m willing to put all of that is available to me to the debts.
Thanks
Sara (Debt Camel) says
Well you can talk to a mortgage broker about what your options might be, but I am not optimistic you will be able to get a remortgage.
Jill Green says
Ok thanks for you help.
Kathy Askew says
Hi. I have 7 years left of my interest only mortgage of £280k. I can afford to pay more each month but would now not be granted a new mortgage as I am not earning anywhere near what I used to earn. I am also on a 2% interest rate which is good. I dont have a pension plan although I do have a small rental property which may release £80-100k. I am not with a high street lender to discuss with anybody. I would love to stay here if possible. Is there anything I can do?
Sara (Debt Camel) says
How much equity is there in your house? How large is it – can you let out a room for tax free income? How old are you?
June W says
Hi,
I have an IO mortgage due to finish in 8 years , there is £85,000 left at the moment , I pay an extra £50 a month more on top of the mortgage payments, so the a.punt has reduced over theast few years , the flat at the moment is worth about £200,000, would it be best for me to do equity release, I am 66years old . Also would it be best for me to wait a few more years so the amount goes down or do it sooner?
Sara (Debt Camel) says
is the mortgage at a good interest rate at the moment? Do you have other debts? Are you currently retired?
Fiona says
We have IO mortgage. Would our debt repayment vehicle class as savings if we needed to claim benefits?
Sara (Debt Camel) says
are these savings actually accessible?
fiona says
Part is (would involve selling shares), some would incur a penalty and some is not accessible at present
Fiona says
Hi there,
He is currently signed off by the GP with anxiety and depression. His mental health started to deteriorate in 2014 and he has had to be signed off several times since – the latest ’bout’ since October 2018. So he still has a job but he is not well enough to go. Even if he were, I am on the vulnerable list and he is not able to work from home but his company have not furloughed anybody as they are classed as ‘key workers’.
We have other debt totalling about £50k but on ‘breathing space’ since October 2019 when my husband’s sick pay stopped.
We have 2 dependent children (age 16 and 14).
Many thanks
Sara (Debt Camel) says
I think you need to talk to a debt adviser now about your options. I suggest you phone National Debtline on 0808 808 4000.
Fiona says
I have spoken to Step Change – they are unable to advise about whether the shares should be considered as mortgage repayment vehicle or savings. I need to sort this out to fill in benefit forms as we cannot currently afford our priority bills, food and care for me.
Sara (Debt Camel) says
Ask National Debtline
Lyn says
Hi ,
My 64 y/o husband’s interests only mortgage of 175k will end this 1st of August. We contacted the mortgage provider to give him an extension for at least 5 years. But for him to get the extension the bank want us to pay 54k which we can’t afford at the moment. I am the only one earning 36k annual . I’m 47 y/o, Is it possible to put my name on the mortgage and then ask a repayment for a 25 years ?
Sara (Debt Camel) says
Why is your husband not working & is he getting a pension?
Do either of you have other debts as well?
Do you have dependents living with you?
Lyn says
My husband has a limited company and his selling stuff in ebay but it’s old stocks & didn’t really make any money and it was better fo him to be at home as we have 2 kids ages 13 & 12. I keep asking him to work but he doesn’t really want to work. He just paid his debt amounting to 20k using his inheritance money he collected late last year. I think he received £52K and it is now 30k left. I also managed to save £11K
Yes I owe £3K in 0 interest for 24 mos and I’m paying it slowly. Yes we have 2 children
He is not having a pension at all because he is not contributing anything.
Sara (Debt Camel) says
So he could afford to pay 30k off the mortgage now? Has he offered to do this if the bank will extend the mortgage by 5 years?
J whitehead says
Our mortgage ends in June. It’s up for sale but not yet sold. Can the mortgage company start repossession proceedings if it doesn’t sell before the end date. Due to our financial circumstances we have not been paying our mortgage payments since last October. This was agreed by the mortgage company.
There is around £25,000 equity in the property if we sell it privately.
Sara (Debt Camel) says
There is currently a ban on lenders starting or carrying on with possession proceedings because of Coronavirus. The regulator has proposed extending this to 30 October (see https://www.fca.org.uk/publications/guidance-consultations/mortgages-coronavirus-updated-draft-guidance-firms) and this is likely to come into effect soon.
In general mortgage lenders are slow to start repossession proceedings if they think you are making a genuine attempt to sell the house. But i think you should talk to a debt adviser if they make threatening noises – it is better to take advice sooner rather then delay. Can I suggest you talk to National Debtline on 0808 808 4000.
J whitehead says
Thank you. Will try them. Great response.