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Options if you have an interest-only mortgage

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:

  1. savings or investments;
  2. by getting a new mortgage; or
  3. by selling your house.

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.

A couple with an interest only mortgage and no plan for how to repay it

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:

Customers are responsible for the full repayment of the capital when the interest-only mortgage matures and we acknowledge that lenders aren’t obliged to offer options to those who are unable to repay at maturity.

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.

Your lender will probably say you have to repay the mortgage, by getting a new one (and no-one will give you one),  by using your savings (which you don’t have) or by selling the house.

“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.

An alternative option is equity release, see below. This may work for some people – mainly older people with a lot of equity.

“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.

Don’t ignore the problem of how to repay your mortgage hoping that you can later get some compensation for it being mis-sold. This may not happen. If you take other steps now to tackle your situation this won’t stop you being able to seek compensation for mis-selling at a later date.

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

You may not like the sound of any of these options. But getting to the end of your mortgage and having to sell the house may not be what you want either.

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.

More Debt Camel articles:

6 ways to save – is one right for you?

How to detox your finances

how PPI can get you out of debt!

how PPI can get you out of debt!

Author: Sara Williams Tagged With:

Comments

  1. 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

    Reply

    • 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.

      Reply

    • 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?

      Also, I see some cases are being won such as https://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=42259
      which is quite complicated but then so is mine.

      Reply

      • 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.

        Reply

  2. 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.

    Reply

    • 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?

      Reply

  3. I have a interest only Morgage of 177 000 and have just received 100000 can I pay this off the interest only Morgage

    Reply

    • 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.

      Reply

  4. 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

    Reply

    • 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.

      Reply

      • 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

        Reply

  5. 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?

    Reply

    • 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.

      Reply

  8. 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

    Reply

      • 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

        Reply

        • The situation is common, but what works for different people can be very different. Some people don’t have a spare room for example.

          Reply

          • 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?

          • 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?

  9. 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.

    Reply

    • 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.

      Reply

  10. 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.

    Reply

  11. 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

    Reply

  12. 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?

    Reply

  13. 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

    Reply

    • 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.

      Reply

  14. 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.

    Reply

    • 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.

      Reply

  15. 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?

    Reply

    • 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.

      Reply

      • 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.

        Reply

  16. 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?

    Reply

  17. 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!!

    Reply

    • 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?

      Reply

  18. 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

    Reply

    • 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?

      Reply

  19. 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

    Reply

    • 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.

      Reply

  20. 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?

    Reply

    • 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.

      Reply

  21. 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

    Reply

    • Apart fro the BTLs do you have other assets, eg equity in your own property? How old are you?

      Reply

  22. 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

    Reply

    • 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?

      Reply

      • 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 ?

        Reply

        • 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.

          Reply

          • 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.

  23. 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

    Reply

  24. 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

    Reply

    • 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?

      Reply

      • 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.

        Reply

  25. 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?

    Reply

    • 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.

      Reply

  26. 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?

    Reply

    • how large is the mortgage, how much negative equity is there and do you have other debts as well?

      Reply

    • 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.

      Reply

  27. 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!

    Reply

    • 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?

      Reply

      • 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

        Reply

  28. 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.

    Reply

    • 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?

      Reply

  29. 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

    Reply

    • Well there is no harm in talking to Nationwide now. They can’t make you do anything you don’t want to.

      Reply

  30. 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

    Reply

    • 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.

      Reply

  31. 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

    Reply

    • 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?

      Reply

  32. 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.

    Reply

    • 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?

      Reply

  33. 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?

    Reply

    • 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.

      Reply

  34. 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

    Reply

  36. 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?

    Reply

    • 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?

      Reply

        • 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.

          Reply

          • 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.

          • yes, you aren’t going to get offered a longer mortgage by your current lender. Finding an alternative lender is a good idea.

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