The number of people with interest only mortgages fell by about a third between 2012 and 2015. However there are still more than one and a half million interest only mortgages. More worryingly, research from Citizens Advice has found that nearly a million people with interest-only mortgages don’t have a plan for how to repay it. If you are one of them, you are risking having to sell your house or have it repossessed if you can’t repay the mortgage.
Some people took out an interest-only mortgage, others converted a repayment mortgage to interest-only in order to reduce their monthly payments. Some people have part repayment, part interest-only, for example if they moved to a larger house they carried on with an existing interest-only mortgage and took out a new repayment mortgage for the additional borrowing.
Whatever your reason for having an interest-only mortgage, 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.
How many people are affected?
Citizens Advice research found that there are 1.7 million interest-only mortgages without a linked endowment or other repayment method. Nearly a million of these mortgage holders don’t have a plan for repayment and many say they haven’t even thought about how they will repay the mortgage at the end.
Other research has indicated that the average expected shortfall at the end of an interest-only mortgage is £71,000.
Some of these interest-only mortgages are ending very soon. Council of Mortgage Lender figures show:
- between 2017 and 2021, 425,000 interest only mortgages will end
- by 2032, the number will reach 189,800 a year.
“Can’t I remortgage at the end?”
A lot of people are assuming this is what they will do. But there are three big problems with this:
- It is now very difficult to get an interest-only mortgage – you need a considerable amount of equity and a large income or another repayment plan.
- 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 new “mortgage affordability” criteria that came in in 2014 unless you have very good pension arrangements.
- If you have a lot of unsecured debt (a common reason for having switched to an interest-only mortgage), this will make it very hard to remortgage.
“Perhaps I can carry on with the monthly payments after the end”
Your mortgage contract says you have to repay the full amount at the end. The FCA has said: “We recognise that customers remain responsible for repaying their mortgages, that repayment of the capital at the end of term is a contractual requirement, and that firms are not obliged to offer options 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.
“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”.
However 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 (perhaps you expected your income to increase so you could later change to a repayment mortgage) or when you switched from a repayment mortgage (perhaps you intended to switch back when your unsecured debts were cleared).
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 shoot up.
- 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 pay off some of the mortgage now, you might be able to afford the higher monthly payments for a repayment mortgage.
These may seem impossible to afford, so you may also need at ways improve your finances;
- are all the adults 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 really a realistic contribution. Do you have adult children at home who aren’t paying you rent?
- do you have a spare room that you could rent out? This would be tax-free money that you could pay straight off your mortgage.
- look into whether you could reclaim any PPI. Some people paid this without even realising! Do this yourself rather than 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 of your pension in case than 25% 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
Another alternative is equity release – this is becoming increasing common, with £393m being borrowed in the first three months of 2016.
Again this may sound like an easy answer, but there are major drawbacks, see What is Equity Release? which summarises the problems. Whilst equity release can allow you to stay in your house when you are retired, the costs mount very steeply.
It will also not be available to many people:
- it depends on you having 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 – and this means 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 being forced to make it when 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 piece together 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. So you could say convert half your mortgage to repayment and plan to repay the other half from a personal pension, and afford the higher mortgage payments by getting a lodger for a couple of years until your current expensive car loan finishes.
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.
Other articles about mortgage problems
Refused a mortgage because of “affordability”?
how PPI can get you out of debt!
Elizabeth says
I have a one bedroom flat with an interest only mortgage of 119.000 with 8 years left and with no hope of repaying the remainder by the end of the term. The property is worth about 220.000 .
I have unsecured debts of 20.000 and was thinking of entering a DMP over 6 years .
I am working full time with a 30,000 salary. i am struggling to manage every month on one salary with utility bills and credit card payments. I have not to date missed any payments .
i was thinking of extending my mortgage and entering a repayment/interest only mortgage but do not think i could meet the afforability criteria if i have a DMP. I contacted Stepchange however there were not able to advise re mortgage
what do you think would be my best options
Sara (Debt Camel) says
Hi elizabeth, I have sent you an email about this as it’s complicated.
Jacqui says
I’m in a very similar situation.
8 years remaining on interest free mortgage.
Dmp with 12 years left.
No savings or investments.
I’m 48 this year.
My house is valued at £310000 my outstanding mortgage is £156000.
I have a 6 year old daughter.
I am very concerned about what I can do.
I’m self employed. When I was granted my mortgage in 2005 it was self certified and I really should not have been allowed this mortgage.
Any suggestions I’m very grateful for.
Thank you.
Sara (Debt Camel) says
who is your DMP with?
Hayley Amber Schlosser says
Hi Sarah, My family and I are in a very similar situation to Elizabeth could you please advise me too in respect of extending the mortgage term? I will be 46 when the mortgage ends and my husband 51. Currently the house is worth 320k with and interest only mortgage of 220k!
Thanks in advance
Sara (Debt Camel) says
When does your mortgage end? How large are the debts in your DMP and who is it with?
Hayley says
Hi Sarah,
We have debts of approx 20k which we are paying off and earn 80k between us. We are not in a DMP at the moment but have terrible credit scores due to having a few very bad years financially. Things are better now and our debts should be clear in the next 6 years. Our concern is that no mortgage company will want to touch us when this mortgage comes to end, hence the need to extend if possible.
Sara (Debt Camel) says
It sounds easy to extend a mortgage – but actually it is exactly the same process as applying for a new mortgage. The faster you can repay your unsecured debt the better. Your credit scored awill be gradulaly improving as your outstanding balances go down.
M Higgs says
Similar position here. I am just coming out of a DMP. No savings. Poor credit rating. Salary £48k, mortgage £225k with 12 years remaining, at a push £100k equity but flat is in a terrible state of repair (no money to save rotting windows, damp, hole in celing, etc). 51 years old, alone, no family. Where I live is expensive, if I sell I couldn’t remain in the area I have known for 35 years. I don’t have anywhere else to go. If I have to move I will have no reason to go on. But how can I stay?
Sara (Debt Camel) says
With 12 years to go and having finished your DMP, your credit rating should be close to perfect long before your mortgage ends. How much have you been paying to the DMP? How long did it last? Some of the disrepair problems sound like an issue for the freeholder?
M Higgs says
Every non-essential penny and pay raise has gone to the DMP since early 2011, currently £850pm which frankly is crippling. Last payment next month (only one ‘missed’ payment in october but was a mistake by barclaycard, Stepchange trying to rectify without success so likely full 6 yrs to clear my record even if I rebuild credit ratimg – so frustrating). Unfortunately freeholder was takimg service charge and doing nothing so took freeholder to leaseholder tribunal years ago – eventually bought freehold (more debt) with owner of other flat, so have disrepair and responsibility. When DMP is paid, what should I be doing, I am afraid about the future. I could aside a chunk per month and wait until credit is better – then, remortgage, I will be 56/57 by then. Or could i save for essential repairs (to replace rotted windows, get new ceiling etc) first. i have no clue what my strategy should be but thought of.moving makes me sick
Sara (Debt Camel) says
In this sort of situation you don’t have to take a “final” decision, it’s often just good to move in a generally good direction for a few months whilst you think things through. One option would be to start over-paying your mortgage by £350 a month and putting £350 a month aside for repairs. After doing this for a few years the repairs may be finished and you can start overpaying the mortgage by even more. Doing that for 12 years would leave you in a much better position. That leaves you a bit more cash so it shouldn’t feel so crippling. Talk to the owner of the other flat about a time to replace the windows – usually cheaper if you get them all done at the same time.
M Higgs says
Sara, thank you so much. That’s really clear thinking and makes total sense. I’ve been dragging this large load alone for so long, with a plan to the future, some of the weight is lifted. Thank you for the thoughtful and incredibly helpful advice.
Wondering says
Am on interest only. Can I have my daughter and her family live in with me .I stop at my boyfriends house most of the time so is this OK to do as my daughter is looking to buy my house off me if possible then I would move in with my partner full time . I have 10years left to repay mortgage off. And we would both be better off.
Sara (Debt Camel) says
It’s your house, you can have anyone you want live with you. You would need lenders permission if you weren’t going to live there at all and were renting house out as a buy to let, but not for what you have suggested. You’ll need to think about things like council tax and contents insurance. And any complications if either of you claim benefits.
MrsNonSmoker says
Our mortgage finishes in 10 years time but we know we can’t repay it – I’ll then be 64 and my husband will be 70. I reckon we’ll end up still owing £80k minimum. The house is worth around £380k at the moment. Before the 10 years is up can I sell the house to my two daughters for £80k and then I’d service the repayments on their new mortgage? We’d carry on living here (all 4 of us) and eventually of course the house would be theirs.
The girls are still in secondary school/college so they’ll be early/mid twenties – obviously if they have married or left home that’s probably not going to work but I suspect they will have to (or even will want to) stay with us.
This would mean we get to keep the family home and they have a home rent free here with us, albeit with a £40k mortgage against their names but in fact be paying nothing. But I am sure there would be other implications – disposal of assets? What if we went into a nursing home?
Sara (Debt Camel) says
It would be entirely unfair to base your plans on an assumption that you daughters will still be at home. They may want to move out to start their own families or for employment. Owning part of a house they are not living it would mess up their rights to any benefits. It would also be a huge handicap – very possible fatal – if they want a mortgage of their own. And it may prevent them taking out smaller amounts of credit too such as car finance.
If they ran up their own debts, or had a business failure owing the tax man, they could be made bankrupt and your house would be sold. If they got married and then divorced, your house would form part of their divorce settlement and may need to be sold. And that’s before thinking of the horrors that can result if there is a family disagreement.
You need to find ways forward that do not involve them, however much you think living rent free and getting the family house in the end would be nice for them.
I suggest you need to find ways to increase your incomes. And obviously cut down on expenditure where you can (check out https://debtcamel.co.uk/detox-your-finances/) so you can chip away at the mortgage over the next 8-10 years. If at the end you can’t refinance the rest, then you will need to sell and downsize.
S mechum says
I have an interest only mortgage with 28.000 remaining but my wife is disabled and the house has been adapted with a downstairs extension I’m her full time carer and so we only have benefits and no savings my mortgage has ten years to run by which time I will be 60 what are my options
Sara (Debt Camel) says
That is a fairly low mortgage amount. Anything you can chip off it will help improve your situation, hence suggestions to look at odd ideas such as reclaiming any PPI. Check things like whether you can be on a low social tarif for water: https://debtcamel.co.uk/cut-water-bills/. If you have a spare room, could you rent it out? Check with your local Citizens Advice for any affect on benefits. What are you pension arrangements like – will there be any lump sum you could possibly access at 60?
Natasha says
We have an interest only mortgage of 235,000 (in my partners name only) and house is worth approx. 565,000 with 11 years left. This year I inherit some money and we will pay a small amount off the mortgage and begin to make overpayments each month to halve the amount owed and would sell the house at the end of the 10 years to repay the balance. However, the lender has written to us asking us to complete a form to say how we will repay but we don’t want to be locked into an agreement as we may also look to remortgage to a repayment mortgage under both our names next year as another option. If we don’t complete the forms from the lenders will they take the mortgage away? We want to make the lump sum payment and have a year of making overpayments before we discuss with the lender.
Sara (Debt Camel) says
Lenders are trying to talk to people with IO mortgages to find out what their plans are and to encourage them to form a plan if they don’t have one. Obviously it depends on the exact wording of the form you are being asked to complete, but it is unlikely to constitute a new agreement that you are locked into, and providing you make the normal repayments to your IO mortgage they can’t “take it away”.
It sounds as though you two have thought things through and have a plan that will work for you. I can’t comment on the details, but I will say that this is a very cheap time to remortgage if/when that becomes an option for you.
Natasha says
Thank you Sara this is really helpful.
sw says
I have an interest only mortgage. I owe £85,000. I have inherited enough to pay it in full so will I still have to pay extra or just the £85,000
Sara (Debt Camel) says
Hi sw, it would normally just be the 85k, plus any interest you owe (eg for the current month?). But if you have a fixed rate deal, there may be an extra fee for early repayment. Ask your lender – they will be very happy to tell you!
Karen Smith says
Hi I am currently on an interest only mortgage which ends in 4 years 8 months. I cannot pay off the mortgage at the end which is currently £89,650. I am also 60 in May. I could take partial retirement then and collect my pension bonus of £24,000 which I could pay on the mortgage to bring it down a bit. Please can you let me know what my options would be. Many thanks.
Sara (Debt Camel) says
I think you need to talk to a debt adviser who can help you look at all your options. It may be better to wait until you are 65 and rather than take partial retirement, which could reduce your subsequent pension and doesn’t solve the IO mortgage problem. Also look through all the ideas in the post above and find ways you can start chipping away at the mortgage even if you can’t repay it completely – these will leave you with more options when the mortgage ends.
Terence says
I have 15 years left on an interest only mortgage 120k left to pay. My house is only worth 75k atm, so can’t remortgage. I was sold an endowment policy bundled in with my mortgage by my (then) broker. I’ve since found out he was a crook, who has had his license revoked for miss selling mortgages and insurance and found out that the policy he sold me was actually a decreasing life insurance policy. I have no other payment plan in place to pay off the capital. I contacted my lender (Birmingham Midshires) explained the situation and asked to extend my term (by 10 years) or switch to full repayment or ideally, both. They told me no. Said the terms of my mortgage deal cannot be changed. They said the broker had arranged a 25 year interest only deal that is something called a regulated, residential mortgage and the mortgage cannot be changed in any way.
I’ve never heard of such a thing. What can I do from here? Who can I raise this issue with?
Sara (Debt Camel) says
The terms of a mortgage can’t be changed, but usually you can just get a new mortgage and repay the old one. However no mortgage lender will give you a 120k mortgage on a house worth 75k. You need to talk to a debt adviser about your options, see https://debtcamel.co.uk/more-information/where-to-get-help/. Talk to Citizens Advice about whether you have anywhere to go for redress about the broker who sold you the mortgage/insurance.
At first sight because of the huge amount of negative equity your best option is probably to rent somewhere else, hand back the keys then go bankrupt – after say 8 years your bankruptcy will be long past and you will have saved a deposit to buy again.
Another option is to over pay by as much as possible for the next 15 years, hopefully getting to a position where you have equity by the end and then get a new mortgage to pay that off.
Caro says
Hi My interest only mortgage ends next year; the amount is £410,000 with property value £750,000. We purchased the house on a self certified interest only basis as both my husband and I are self-employed; we have always maintained the payments on time and in total. We can of course sell and realise the equity to pay off the mortgage, the problem is this is our home and we still have both sons living with us; I am 58 and my husband is 63, we are both still working, can you please help with an idea that can keep us in our home preferably with the same mortgage company ?
Sara (Debt Camel) says
I can’t see why it matters that it is with the same mortgage company. You have left this rather too late to be coming up with ideas for how to reduce the 410k significantly… I suggest you need to talk to a mortgage broker about how much you two will be able to get a mortgage for.
There are now a couple of lenders that will consider IO mortgages up to the age of 70 – Santander and Barclays, see http://www.thisismoney.co.uk/money/mortgageshome/article-4188252/Need-mortgage-past-age-65.html. It may be worth considering these and planning to downsize after that, assuming your children will be gone by then?
If you go this route, I suggest that your sons should be paying you a reasonable amount of rent, not seeing this as a chance to live for free.
Andrew Walter says
Hi
Im 63 and i work part time earning about 15k. My io mortgage ends in 7 yrs. I owe about 100k and the house is worth 115k. Id like to try and stay here if i can. Im starting to look for suitable capital and interest mortgages for older people. I have about 25k of savings from oensions i have received. I dont know if jt is better to use the savings to reduce the debt and get a suitable mortgage. I might struggle to cope to make the payments. Otherwise I may have to sell which I dont really want to do.
Sara (Debt Camel) says
Can you work full time for a few years to pay off more of the mortgage? Do you have a spare room your could let out? Any PPi you may be able to reclaim?
Most of the specialised product need you to have a lot of equity, so you need to look at options that can help with that.
Dawn walker says
my mortgate is up in Dec 2018 it is interet only and I owe 62,000. The property is worth about 150,000. I am 56 and can take a pension lump sum when Im 60 of about 45,000. What should I do, what are my options I would like to remain in the house as the equity would not buy me anything decent.
Sara (Debt Camel) says
Hi Dawn,
if you look back a few comments , I gave a link to a news article saying that a couple of lenders are now giving IO mortgages up to 70. You have a lot of equity. It may be that an IO mortgage to age 65 or whenever your normal retirement date would be would be a good option? If you could aim to repay part and clear the rest from your pension lump sum? There are a lot of variables here if you have freedom to take your pension at different ages.
Jayne G says
We have an IO mortgage of £135k due to end in June 2019. We self certified as my husbsnd was self employed and I was not earnong a lot at the time. I am 57 and my husband is 10 years older. Our house is worth £375k so we have a lot of equity. I now earn £37k a year and I have tried to remortgage to a repayment but our own bank (NW) won’t help and our current mortgage holder says that it would only give us a new mortgage over a maximum of 8 years, when I will retire. This would mean repayments of over £1500 a month which we cannot afford. They have said my husband’s age has a negative impact. We could sell but we love our home and it is ideally situated for amenities as we get older. Are there any options for people in our situation?
Sara (Debt Camel) says
Do you have a spare room you could rent out that would make the £1500 a month affordable?
Darren says
Hi,
Im 33, earn £26,000 and have an interest only mortgage of £108,000 with 17 years left on the term. I want to change to repayment and extent the term to 30 years to make it affordable. But the house is only worth about £85000 now. Is this possible?
Sara (Debt Camel) says
No. If you are sure this is your forever home, you need to start overpaying this IO mortgage by as much as possible every month. That should start chipping away at the mortgage, hopefully by the time the IO mortgage ends you will then be able to get a new repayment mortgage for the rest.
But if you are likely to want to move, it may be better to consider drastic options now such as handing back the keys and going bankrupt to get rid of the shortfall. In 6 years time your bankruptcy will be all past and you will be saving up for a new deposit.
John Woodgrove says
Going bankrupt on £27000 isn’t really great advice. How much would that property be worth in 6 years time? You could get a mortgage but you’ll have a shortfall so start saving up or use low interest unsecured loans if you want to be there for the long term. Bankruptcy is not really necessary based on the facts provided alone.
Sara (Debt Camel) says
That would be why I suggested a different approach if he is happy to be there for the long term…
De says
I have an interest only mortgage which ends in 4yrs. It has £165k owing and only worth £220k now. I was a single parent and self employed when I took out the mortgage. I am 61 yes old and due to pension changes in age don’t get my pension. If I sell I won’t have enough to buy anything and if I rent any capital will dissappear within 4 years. Councils won’t help house me. What can I do. Please help. Thanks
Sara (Debt Camel) says
Will you only have a state pension? Are you able to overpay your mortgage at the moment ?
De says
Sadly I have already worked 44 years but only have a state pension…when it arrives in 2017.
Sara (Debt Camel) says
With only a state pension you probably have no realistic options for getting a new mortgage. And I suspect you are too young and don’t have enough equity for equity release to be possible.
If you sell, you will be able to rent. This will mean your capital declines. When it gets below a certain level you will be able to get help with your rent, as it drops further you will be able to get more help with your rent. That sounds a bit vague, but a lot is changing in the benefits sytem at the moment, with the changes to state pension, pension credit, the introduction of Universal credit and the “transitional rules” that apply in some areas as UC is being phased it. I think it would be good for you to find out more about how these will apply to you – I suggest you go to your local Citizens Advice and ask.
But you can assume that at some point you will get help with the rent. Also when you are retired you will be in priority need if you are evr unable to find anywhere to rent, so your council should assist you.
De says
Thank you for your comments. All as I assumed. Options: 1. Rent and capital decline.
2. Buy a cheap property in a different country.
3. Buy a cheap property somewhere in uk
All options need to be examined. I have 4 years
Never give up is my advice :)
Sara (Debt Camel) says
Never give up is great advice!
kev says
I am coming itno the final year of an interest only mortgage and the mortgage value (70k) exceeds the value of my property (at best 55k). I have no savings and am no longer living in the property as I moved in with my partner. I have other unsecured debts that I am managing but at the end of the mortgage term I won’t be able to sell the property as expected to pay the mortgage back. My credit report and file is good but the property is the millstone around my nexk and is causing me to worry whether bankrupcy is my only option?
Sara (Debt Camel) says
If you are no longer living there and have other debts as well, bankruptcy may well be a good option for you. I suggest you talk to a debt adviser about your full position, see https://debtcamel.co.uk/more-information/where-to-get-help/ for suggestions about where to get help.
Christine Lawrie says
I have an interest only mortgage of £163K house is valued at around £220K. We have a poor credit history and cants seem to get a mortgage anywhere. My Intrest only runs out in 4 years and we dont know what to do. We are only 10 years off retirement age with 2 dependants still at home. We would like to stay in this house.. Would there be anywhere or anything you would recommend i.e lifetime mortgage . Sell and Rent back anything at all which would help?
Sara (Debt Camel) says
Do you have a lot of unsecured debt?
Your dependents, how old are they?
Sell and rent back is very often close to being a scam, once renting you may find you have no security at all and are given notice to quit.
Ryck says
I am 57. I have an IO of 67,000 paying £350 per month, plus an secured loan of £6500 which I pay £240. per month. The IO finishes in 10 years time. My flat is valued at around £250,000. My salary is £1113,000. UI live on my overdraft, with no access to funds for repairs. I know I will not be able to pay off the IO in ten years. Any suggestions would be appreciated.
Sara (Debt Camel) says
When does the secured loan end?
Jane says
I am 68 with an interest only mortgage of 30,000 which runs out in July 2017. I am parted from my husband although he has been good and has been paying 100 per month. I live on a small state pension made up with a small amount of pension credit. My lenders’ mortgage advisor is trying to get me a mortgage until I am 75 but I think the repayments are going to be too high for me to manage. Firstly, can I continue to pay interest only until I am well enough to cope with selling or die..or can I get a longer mortgage term to enable me to afford the repayments, I live on my own and am terrified of moving away from my friends and neighbours., I have lived here 32 years. My husband can’t help me any further. Please advise
Sara (Debt Camel) says
How much is your house worth?
Is the house just in your name or your husband’s too?
Jane says
About £750,000 and it is in joint names
Sara (Debt Camel) says
With a huge amount of equity it is probably worth looking at equity release, see http://www.ageuk.org.uk/products/financial-products-and-services/equity-release/, but your husband would have to agree to this.
Another option might be to get a lodger which would make a short repayment mortgage more affordable?
Jane says
I have looked into equity release but it’s got such a bad press, my mortgage broker advised me against it, I have tried to find one that allows you to pay the interest on the loan but to no avail. I have thought of a lodger but I would feel quite vulnerable and it would stop any benefits I am getting, so I wouldn’t be any better off. I will keep trying to find a solution. Thank you for your input and time.
Sara (Debt Camel) says
Equity release does have a bad press, but if you have looked at your other alternatives and at ER in detail, then it may be right for you. It’s easy for an adviser to say sell and move somewhere cheaper, but it’s your life and your decision. What I would say is that if you have any good reasons to move – eg to be closer to children / grand children – then it really is worth considering. Also if there are any reasons health wise why you expect your current house will become a problem in the next few years for you. It is (a) easier to move and settle down elsewhere when you are younger and fitter. And (b) going for ER now will really reduce your options to move later. But if you are sure staying where you are is right, then don’t rule out ER just because it has had a bad press.
Jane says
Thank you…my head is spinning with the worry, I have two children and two grandkids so I would hate for the sake of trying another avenue to lose a big proportion of my home to ER. I will try and maybe get a remortgage to the age of 80. Just thought u may have know if I had a way of carrying on paying interest only, bit upset as I am paying interest at the rate of 4.99 % they have had quite a lot out of me but are not interested in helping me in anyway (Barclays)
Sara (Debt Camel) says
Well if your children or your ex can’t manage 30k between them, I am afraid that I think you need to give priority to what your needs and wants are. You have a huge asset. You shouldn’t be living in very restricted circumstances and worrying all the time.
Augusta says
Hi Sara,
My parents have an interest only mortgage of £330,000, and their house is worth £670,000. The mortgage ended in July 2016, they have never missed and payments and have have continued making their payments up till now. My Dad is 66 and my mum is 65. Their mortgage company is now demanding full payment or they will begin repossession proceedings.
My parents also have a buy to let property with a mortgage of £130 and the property is valued at £380. We have spent the last few months trying to find another option other than selling the house but last month my parents finally decided to put both properties on the market.
My mum is heartbroken at the prospect of losing her home and potentially having to move away from her children and grandchildren. I am also devastated that I can’t do more to help her keep it. Please can you look at this case and let me know if there is any other option we have overlooked? I’d like to be sure that that we really have looked at all options and that selling the house really is the only solution.
Thanks in advance.
Sara (Debt Camel) says
If they sold the BTL, would they be able to afford an 80k mortgage? Do they have to move away, if they sell both properties they should have over 650k in cash…
Augusta says
They should be able to, but we were advised that they might struggle to get a mortgage because of their age.
Property prices are ridiculously high where we live, so they probably would have to move away if they want something similar to what they have now.
Trevor says
Hi..My IO mortgage comes to an end in February 2018…I have £110.000 owing on the house (which I cannot repay) and it is probably worth £150.000. I will be 69 at the end of term with a poor credit history since retirement. As I have health issues, moving would be traumatic to say the least. Could you please advise me of any possible options before I contact the lender as I really would like to stay.
Thanks
Trevor
Sara (Debt Camel) says
I’m not clear that you have any options at this point. It could be useful to go to your local Citizens Advice and they can help you look at your unsecured debt as well as your mortgage / housing options.
Jenny says
Hi, my partner who is 60yrs has IO mortgage due to end in 2yrs, he owes £193K & the house is valued at £315K. I have £10k in isa which I plan to use to reduce the IO. He’s currently paying interest only however we are in a posistion to afford a repayment plan but the lender will need to do credit checks etc. before they can switch us. Unfortunately partner has had bankruptcy and inland revenue have £15k 2nd charge on the house. I assuming he won’t pass the credit checks because of his bad credit rating. If we can prove we can afford the repayments ie payment slips and outgoings over an extended term ie. An extra 15yrs will they have to accept our offer or still insist we sell and leave? I am disabled and can’t work but with a good credit history and we have a child of 13yrs old. Of course we don’t want to leave and stay put and pay off the IO mortgage. Also when he switched his mortgage to this current lender we had no endowment. Any information would be appreciated.
Regards
Jenny
Sara (Debt Camel) says
when did he go bankrupt?
Jenny says
He was made bankrupt 2005 Sara.
Sara (Debt Camel) says
Well that would have disappeared from his credit records years ago – if his score is still bad he must have recent problem debts? How much does he owe unsecured? How much do you owe unsecured? What are his pension arrangements like?
The current lender is HIGHLY unlikely to let you stay for years without a new mortgage.
Jenny says
He has no credit cards or unsecured debts whatsoever, just the ccj from inland revenue that’s all. Having checked his credit file the mortgage debt and the inland revenue debt are thing against him. The current lender is B&B as you’re aware they no lonher sell mortgages they’ve said if we change to repayment then he would need to prove we can afford to switch to repayments and have a credit check done, our concerns lies with he will not pass the credit checks, which I assume means we’d be turned down for a repayment plan even though we can afford it.
Sara (Debt Camel) says
Is he repaying the CCJ?
Kathryn marks says
Hi , my father in law is 74and has an interest only mortgage due to end this September , he will still owe £55k its worth between £96-£108 and has no way of repaying the final amount. He has pension credits that help pay his interest mortgage
Could he get an extension ? Or what would be best equity release or home reversion ?
His wife is not on the mortgage and is younger 71 ? We really don’t know what to do for the best?
They don’t want to sell , and have no savings or pensions due.. please help x
Sara (Debt Camel) says
An extension would be very unlikely.
You don’t mention if either of them has much unsecured borrowing? If they do, there may be little that can be done apart from sell.
If they don’t have much unsecured borrowing, then it’s probably worth looking at equity release but I don’t know if at your MiLs age they could release enough to repay the mortgage. I can’t give advice on this. From what I understand, the home reversion market has largely disappeared.
The two largest providers of equity release in the UK are Age Partnership and Key Retirement Soluitions. You could talk to them and see what they suggest? Ask them about fees.
.peter says
Hi,I have an interest only mortgage for £29000,I have been putting away £50 a week for over ten years in a box at home in cash,I nearly have enough to pay off my mortgage in about 12 months,my children tell me I can’t pay it off with cash,is this right.i am 69 now,my interest only ends in 2 years time,I would grateful if you can tell me is this true,and what I should do with the cash I have saved to pay off mortgage.thanks Peter
Sara (Debt Camel) says
Do you have a bank account? Who is your mortgage with?
Peter says
Hi,Sara I have a bank account with lloyds,and mortgage is with Britannia,
Sara (Debt Camel) says
Hi Peter,
I think you should go and talk to Britannia if there is a branch near you. Tell them about the money you have saved. It may be possible for some of it to reduce your mortgage starightaway. And the rest could be put in a savings account at Britannia. That way you would get a bit of interest and, just as importantly, the money would be safe from a burglar or a house fire.
Andy says
My father in law has a second house, currently rented out, on an interest only mortgage. The mortgage was for £100,000, however the flat is worth around £200,000 currently.
Is it as simple as myself getting a mortgage and buying it from him before his mortgage ends in approximately 3 years? Assuming we buy it for approximately 150,000, the loan to value will be very good.
Sara (Debt Camel) says
You would just be purchasing a property, so you would need to get a mortgage. The fact that you are buying at a big discount effectively gives you your deposit. On the sale your FiL’s mortgage will be repaid.
There are some possible “wrinkles” which you need to look into close to the time of the purchase. So far as I am aware, the stamp duty you pay would depend just on the “purchase price” not the value of the property, but your FiL’s Capital Gains Tax situation would depend on the value of the property not the price. If your FiL dies within 7 years there may be some complications for his inheritance tax as the cheap price could be considered to be agift to you. If your FiL needs local authority care in the next few years, there may be a problem because he has deprived himself of an asset by selling the house cheaply to you.
Karen Corbett says
Hi. I have had a together mortgage for ten years on interest only with Northern Rock (now NRAM). I have been separated from my ex partner for about 9 years and have been stuck in the mortgage with him due to him being uncooperative and NRAM being really unhelpful. The ‘together’ part of the loan was my ex partner’s debt and now amounts to around 17k. However he stopped paying as he has stepped away from his responsibilities and I am left having to pay for the loan also, and this has been on an arrangement to pay for a couple of years. I have an option to try for a mortgage with another provider to pay jut the mortgage and not the loan. This company would specialise in bad debt (due to my arrangement to pay on his loan), or I could stay with NRAM which would mean I would have to put the loan and mortgage in my name. While this is a bitter pill to swallow, I am wondering whether it would work out better value than going with a new company considering I have paid off ten years of the interest part compared to leaving the 17k in joint names?
Sara (Debt Camel) says
I can’t tell you what you should do. But some points for you think about / look into:
– it may feel like a “bitter pill” but legally you are liable for the whole of the mortgage and together loan. And if he isn’t paying, then it’s sensible to think of these as just being your debts.
– if you remortgage with a different company, it’s possible the interest rate on your together loan will shoot up or the arrangement to pay will end. NRAM may decide to get a charge on your house.
– bad credit mortgages are normally very expensive. What would you be gaining with this one? If you have extra money it may be better to repay the together loan faster.
– You don’t mention if you have other debts? Or if the house now has equity?
Karen Corbett says
Hi Sara. Thanks for your reply.
I do not have any other debts, in fact, I had excellent credit until I was left with this loan. I was hoping he would do the right thing and start to pay his way again, but he had been trying to bully me into going bankrupt, as he had other debts and wanted to just leave his responsibility of all debts, including the mortgage. I am a little more sensible than this and refused as I know this is not a problem solver. I would rather keep the house and make something positive from it.
The house does not have equity, in fact, it is probably maybe 5k in negative equity as it was one of the mortgages given over 100% before the crash.
Karen
Sam says
Hello,
I have an interest only mortage for £101,000 over 8 years. I have paid it for 8 years. 4 years ago the morgage company then asked me to pay off the mortage in full.
I told them I could not pay it off. They asked me what I intended to do. After explaining that my wife was disabled and the house had been alterd to suit her, I asked if I could extend the morgage. They told me I could not extend. I sent them an offered in writing to pay them £600 a month to pay off the debt. They then sent me a expences sheet to fill in. I filled in the forms and sent them back to them. This was 4 years ago. I did not hear back from them. They just kept taking a payment of £426 a month from my bank account. I then contacted them a few weeks ago and asked if I could pay £5000 towards my payment. They contacted me by phone and said My morgage should have been paid off 4 years ago. They told me I stil owed them £101000. I was under the impresion that the £426 a month would have come off my final payment as I had not heard back from them.
I do not think there is enough equity in the house for a lifetime morgage.
I am aged 68 and my wife is 69.
Any help or sugestions would be appresiated.
Sara (Debt Camel) says
My guess is that they just carried on taking the old “interest only” payments? If you think you have been misled by the lender, you could talk to your local Citizens Advice.
getting a valuation of the house woul from an estate agent would be a good step as you may need to check about lifetime mortgages.
Florence Owono says
I have a 3 bedrooms house with an interest only mortgage of 208.000 but I have some arrears on the mortgage of £9310 . The property was evaluated worth £350.000-£375.000 2 years ago. I don’t want to sell it now with the BREXIT uncertainty and the housing economics situation. But, I am struggling to keep up the payments. I have been made redundant, and my husband has been out of work since diagnosed with one the bad C (level 3),4 years of chemotherapy and now he is on the remission phase.We are both claiming benefits, both not savings, all finish…
I was wondering if we can rent out the whole house with the arrears? The idea will be to have it rent out and that will pay the mortgage and the debt too,(the evaluation we had was up to £1450/month). The interest only mortgage repayment is £414.58 + £200(agreed with the lender to be paid on top) overall £614.58.
Sara (Debt Camel) says
That probably isn’t going to work as it could affect your benefits badly … I suggest you go to your local citizens Advice and they can help you to look at this and also your other benefits and mortgage options. Also it’s always worth getting an up-to-date house valuation rather than guessing.
Florence Owono says
Hi Sara,
Thank you for your advice. Ii have had the house valuated for both selling and renting. In fact , the reason why we think of renting is because we want to go leave abroad for a while and come back in 2/3 years time roughly. I might have some opportunities risen there (Canada).
Do you think , that can be an option? then.
Once again ,thanks a lot
Miss M says
Hi Sara
I’m 55 and mum is 85 we jointly own 4 bed flat and int only mtg is due to end next month. The mortgage co say they won’t extend mortgage as they have ” no facility” to do so despite being told on the phone it had been and could be done. The plan was always to sell up but we are simply not ready to move yet and I’ve been trying to arrange another 5 year int only through Which? However, despite being granted a DiP we failed the additional stress test as we don’t have enough savings should one of us be left to fund the repayments alone and we don’t have large enough pensions.
Is it worth trying to find another mortgage broker? I didn’t really have faith in the advisor who I felt wasn’t engaged enough. Would it be possible to have the mortgage in my own name only?
Sara (Debt Camel) says
I am going to assume that you must have been quite close to getting the mortgage if you were offered a DiP. In that case it may be worth talking to another broker, but I suggest you need one that specialises in the older market. Try http://www.agepartnership.co.uk/.
I have to say that yoyu may be a lot better off if you simply sell and downsize though. Putting this off because you are not ready could prove a really expensive decision.
Adam says
HI,
my parents (family home) have a interest only mortgage which is coming to a end in 2 years,
o/s is around 95k. there is no way that they can afford to pay this.
house is valued at 350k and o/s interest only mortgage is 95k.
however they are not far off retirement so cannot get a extended mortgage.
Can the ownership of the property be transferred into my name and a mortgage be taken out to cover the o/s?
Also if this can be done and in a few years i want to move out could i have another mortgage?
Sara (Debt Camel) says
Yes they could give you the house and you could get a mortgage, assuming your income and affordability is good. But this may make it considerably harder for you to get a second mortgage in future. It could turn into a millstone round your financial neck. Your parents who are close to retirement could live another thirty years or more.
Helen Johnson says
Hi, I have an interest only mortgage of £70,000 which ends in 4 years. My ex partner went bankrupt, so endowments (in his name) went to bankruptcy trustee. I am sole person on deeds now but have no repayment option in place.
My house is now worth between £280,000-£300,00, so lots of equity. My only problem being that I’m self employed with low income. I would like to stay in my home but unsure of my options. I’m 47 and would like to consider a mortgage but would low income and high equity be enough? have a credit rating slightly above average and not much debt, other than mortgage
Thanks in advance.
Sara (Debt Camel) says
High equity won’t help if your income is insufficient. Do you have a spare bedroom?
Helen Johnson says
Hi, thanks for the reply.
I don’t have a spare bedroom big enough for renting out unfortunately. I thought about equity release, but being younger, thoughts are that I may lose out at the end….
Wondering if talking to my mortgage company might help and telling them my situation. I’ve never missed a mortgage payment.
Sara (Debt Camel) says
First you would be surprised how small a room you can let out, especially if you look at Monday to Friday lodgers – which are less intrusive for you anyway – or AirBnB.
Your aim here isn’t to repay the mortgage in 4 years – that is unlikely to be feasible! – but to significantly improve your situation so that after 4 years you would hopefully have some money saved up and will be in a good enough position to get a mortgage on the rest.
So
– get your non-mortgage debt down to zero and your credit rating up to excellent
– increase your self-employed income if possible
– look for additional sources of income such as letting out a room
– check if there is any PPI you could reclaim
– consider changing jobs so you are employed at a better salary etc.
You are too young now for equity release and still will be in 4 years time.
I suggest working on improving your position for a couple of years before talking to your mortgage company.
Helen Johnson says
Hi Sara,
Yes, that sounds feasible. Although, letting out a room to a stranger isn’t really an option with two young children in the house, one of which has anxiety issues.
My self employment income can be increased easily, I just have to work out hours because of childcare etc.
Thanks for your help with this, my heads a little more ‘sorted’
Helen
Debbie says
Hi
I wonder if you could help me. I separated from my husband 12 years ago. I am in another relationship and in 2007 we bought a house together but the mortgage is in my daughters name as at the time I had not been working very long, we have paid the mortgage all this time to my daughter although the house is ours, we have done a considerable amount of work on it. The mortgage is an interest only and we would like to change this now and put my partners name on the mortgage. I am not sure that I would be able to have my name put on it as I am 12 years older than my partner who is 46. We were advised that we could just get a deed of trust to cover the fact that the house is ours but this does not solve the interest only problem. Can you advise as to what we should do now. We have around 80,000 equity in the house.
Sara (Debt Camel) says
How large a mortgage would you need? How much could you afford to repay each month to it?
Florence Owono says
Hi Sara,
Do you think I can ask my lender to use the positive equity I have in my property although I have arrears in my mortgage repayments? The reason is I want to do some works improvements in the house and then either rent it to earn more so I can repay my mortgage a bit more than I am supposed.
I have had 3 evaluations by 3 différents agencies, and there is a potential earn of money by doing the work and have it rent . The evaluation was £1450-£1500/month. We haven’t done any works since we bought the house.
Thank you for your help
Regards,
Sara (Debt Camel) says
That sounds very unlikely to me. No lender is going to think it’s a good idea to lend you more if you are already in mortgage arrears, especially as your previous comment said you and your husband are both on benefits.
Florence Owono says
Thank you Sara for your reply. Now the last question will be what will be your honest advice on this situation?
Can I go for rent? Or shall I just sale my house under the current economical and financial situation of the country? Because, really , I will not won the lottery and I really don’t see how I will be able to solve this.
Thank you for your assitance
Jane says
Hi.
We have a IO mortgage of £185000 remaining term is 6 years. Our house is up for sale at offers over £450000. The idea was to move now to reduce the mortgage and to go onto a repayment. Unfortunately, no offers have been received yet. We have already reduced the asking price by 10% (house originally valued at £495000).
We have been offered a no interest loan from a set of parents of £40000.
Do you think it is wiser to still try to sell the house – and have a mortgage of approximately £100000 – £120000 or use the loan of £40000 to pay a chunk of the mortgage now – and begin overpayments on the mortgage for the remaining 6 years, which by the end of the mortgage term will leave us owing £120000 and then get another mortgage for that which will allow us to stay in our beautiful house. Our ages are 49 and 46 – and between us we earn £75k.
It seems daft to me to leave such an incredibly low IO mortgage and start paying double when we could still have 6 years staying where we are.
We would probably struggle with the overpayments – Everything seem to cost so much more, a relatively reasonable income and yet we are always in debt.
What would your advice be?
Many thanks
Sara (Debt Camel) says
How much other debts do you have?
Can your parents really afford to give you this loan?
Jane says
Hi Sara,
We owe £8000 on a credit card and owe the other set of parents £18000.
The parents can afford this amount – they have recently sold an expensive London property and moved to a cheaper property in the South West.
I wondered what your thoughts were on staying on an IO mortgage until the term runs out…..rather than a repayment which will at least double what we pay each month.
Many thanks,
Jane
PETER CUTHBERTSON says
hi my mother in law has 6 years of an interest only mortgage to pay . Her husband died 4 years ago and there are no funds to pay off mortgage of £60000. The value of the house is also only around this figure. My mother in law is retiring this year and is currently only paying around £134 per month on mortgage. What should her next steps be any advice appreciated.
Sara (Debt Camel) says
It is unusual for there to be no equity so near to the end of a mortgage. Does your Mother in Law have a reasonable pension?
ray says
I have a interest only mortgage coming to end of by 1 6 2017 cant pay it off I am 74 with no saving can help
Sara (Debt Camel) says
Hi Ray, can you say some more – how large is the mortgage? How much is the house worth? Do you live on your own? What is your pension like? Do you have other debts?
Bibi KOMDAR says
Hi Sara ,
My husband is 67 this year and his IO mortgage is coming to its end this June 2017. He has to repay £148000 and the house is currently value between £270000-280000 I want to help him but I’m a student myself and actually looking for work in relation to my studies .I’m 25 this year. He is still fully employed with a salary of £47000 a year but because of his age the mortgage lender will allow him to extend the mortgage for three years with a payment of approximately £3700 a month (that include the capital plus interest ) . It’s obviously not affordable . He looked at equity but was not so convinced and is not going to consider it. My next suggestion is because I’m insured financially ( he put me on his work pension and Also he has been putting money away as savings for me ), and a lot younger, can the mortgage lender extend his mortgage repayment for another 10 – 15 years or can it be transferred to my name and he carries on with the payment?
Any advice would be greatly appreciated.
Thanks.
Bibi
Sara (Debt Camel) says
The mortgage could only be in your name if you had enough income to borrow that much, which as a student you don’t. What are his pension arrangements like?
David Collins says
Hi Sarah.
I have a interest only mortgage with no way of paying it back. I owe £100000 on the flat the term ends April 2018. I had to give up work two years ago because of cancer. Iam 64 this year and have no savings only a very small NHS pension. My wife and i have moved to a non eu country and staying with my mother in law. The flat in uk is empty and up for sale.it needs upgrading but ive no money to do this and the lease has 61 years left on it. Its cheaper to live here rather than in uk. This is very stressful for me and making me ill. Do i just keep paying the mortgage in the hope the flat will sell within a year. Zoopla value the flat at £122000 its on the market for £100000 just to pay of the mortgage. I bought it nine years ago for £105000. Do i hand the keys back? Go bankrupt ive no idea its a nightmare. Dave.
Sara (Debt Camel) says
Hi David, that sounds a very difficult situation. Of course with family abroad you have other things to consider, but you may get more benefits and better healthcare in the UK… For your finances, I think you should talk to National Debtline, see https://www.nationaldebtline.org/EW/information/abroad/Pages/living-outside-the-uk.aspx. There are time limits for applying for bankruptcy if you live outside the UK – I am saying this because you mentioned it as a possibility, not because I am suggesting it.
David Collins says
Hi Sarah,
Here is an update on my situation. I have had an offer on my flat which i have decided to accept. It is less than i was expecting and will leave me with a £20,000 shortfall. At the moment i pay £195 a month for the mortgage. After i sell i will not have to pay council tax or a service charge anymore therefore i could repay the shortfall at £300 a month. Would i pay back the amount outstanding or would the mortgage lender charge me a high interest on this? Ive not approached them yet but thats the most i can pay back. Thanks. David.
Sara (Debt Camel) says
You need to talk to the lender, but normally they will be reasonable if you are offering a good repayment. Are you sure you can afford £300? Do you have other debts as well? Bankruptcy may still be a sensible option if you do.
David Collins says
Hi Sarah iam paying out nearly £400 a month now for mortgage council tax and service charge so that would stop when i sell. Therefore £300 from that would go to paying the shortfall. I cant really afford it but what else can i do? Ive no idea what to do as the building society would still want the outstanding amount back. Dave.
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.
Sara (Debt Camel) says
It would help if you could say more: what you and your husband earn. what both your pension provisions are like. what repayment you think you could manage each month. how much equity there is. etc
Beryl says
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.
John says
My father is 63 his interest only mortgage ends in 6 months, he recently had a stroke and can’t work the final payment needed is £90,000 there is no way he can pay that , my mother is dead he lives alone what can he do HELP
Sara (Debt Camel) says
Hi John, I think your dad needs to go to his local Citizens Advice where they can help him look at his full situation, including his benefit entitlements.
John says
Thanks , yeh he is receiving benefits at the moment for his disability. Just need to find out how he could possibly increase his loan term maybe until he gets his pension or something to pay off the £90’000 or try something to get me on the mortgage?
Jason says
We currently have a repayment BTL mortgage with £124,000 left to pay on it with 17 years remaining, I am 47. We have applied to our mortgage lender to swap over to an interest only BTL as we need to raise some additional funds. Our mortgage provider has agreed to this but want to know what repayment vehicle we plan to use to pay off the capital. Do we need to have a repayment vehicle? Could we just state that we plan to sell the BTL property at the end of the term to pay the outstanding capital? The property is currently worth £310,000 and is in London. We really only need to move over to the IO mortgage for a minimum of 2.5 years, then switch it back to repayment. If we do need a vehicle repayment such as an ISA etc… then the extra money that we plan to raise from switching will end up being paid into a fund and therefore would not be worth us swapping it over. Any advice would be greatly appreciated.
Sara (Debt Camel) says
I think many mortgage lenders would be happy with that. If yours isn’t, you could remortgage with a different lender when your current fix ends.
Jason says
Hi Sara
Thanks for the advice, it seems my lender is happy for us to proceed with the property being the repayment vehicle.
Chris Woodrow says
Our mortgage finishes in October 2017 and we will have approx. 23k to pay on a house worth 270k. We will have approx. 10k to reduce the balance to 13k.
I have paid all my pension money in to reduce the mortgage from 65k and we have put the house up for sale.
I will be 64 and my wife 62 when the mortgage is due to be repaid and our income is only around 12k pa after tax.
What else can we do.Our credit rating is also poor.
We have spoken to Chelsea b soc several times over the last 12 months but all they will say is that they will only deal with the situation when it materialises in October any thoughts on a possible solution?
Sara (Debt Camel) says
Why us your income so low? Have you looked at ways to increase it?
How large are your unsecured debts?
This is quite a small amount of money – are there any family members that could help you?
Kevin says
Our mortgage finishes in 3 months with a shortfall of £27k and £3,500 of old credit card debts being paid of slowly . Our house is worth £250k and can afford £450 each month which is what my interest only mortgage payments are.
We have pension funds in total of £120k but can’t access till we are 65yr.
Would it be a good option to get a secured loan on the house to pay off the £30k of my combined mortgage and debt. Should have reasonably good credit score
Thank you in advance for any opinions as BS only wants to discuss mortgage options now.
Sara (Debt Camel) says
How old are you two? Are your pensions money purchase or final salary?
Philco says
My IO mortgage of 31,000 finishes in 7 years. I have no plan in place at it was massively under performing and I cashed it in and spent the money on a new kitchen and bathroom.
My intention is to sell up and downsize, my home is probably worth 90,000.
I’m single, 52 and self employed. My lender is currently badgering me for information on how I’m going to pay, obviously I don’t want to enter into another mortgage or payment plan as I’m not staying here. Before I call them, are they likely to accept my intention to sell or will they insist I take up a new plan, also if they do accept my plan on downsizing, are they likely to want the sale to go ahead sooner rather than later? – I’m currently renovating it in order to get a better price so don’t want to sell right away
Sara (Debt Camel) says
Providing you are making the mortgage payments, they cannot force you remortgage or to sell before the end of your mortgage.
I will say that it is quite easy to spend more on renovating houses than is added to their value. Also I don’t know if you will need a new mortgage on the new place – if you do, then there is a very good reason to move sooner rather than later, as you will be younger and find it easier to get a repayment mortgage that you can afford.
Philco says
Thanks.
The renovation is costing very little as I’m a builder and doing the work myself.
I won’t be getting another mortgage – whatever I’m left with after paying back the lender will get me something small and dilapidated that I can renovate gradually as I live there.
polly says
We have an interest only mortgage due to end in seven years and also a secured loan. After being in negative equity for years my house now has 12,000 equity in it . is it possible for me to sell my house to my son, who intends to get a mortgage and then rent to me for life.
Sara (Debt Camel) says
Yes, you can sell your house to your son – the price would have to be large enough to settle the mortgage and secured loan.
BUT I want to point out some downsides to doing this. You and your son may still think its’s the right way forward for you, but you both need to have thought hard about the possible things that go wrong before doing this.
1) has your son looked into his tax situation. This will be treated as a BTL and the tax treatment is a lot less favourable that it used to be.
2) if you son applies for a mortgage/remortgage for his own house, having a remortgage on yours may make this more difficult.
3) if your son gets divorced, your house becomes one of his assets that goes into the asset split with his ex.
4) if your son goes bankrupt, you lose your house.
5) if your son needs to claim any means-tested benefits, the value of your house may well prevent this.
6) you need to consider what will happen if your son dies. Anyone can die unexpectedly in a car accident. Or if he becomes unable to work and cannot pay the mortgage on your house.
Karen says
Hi Sara, I am so pleased we aren’t the only ones in a crisis with an IO mortgage!
Our mortgage runs out in 8 years and we will be owing 150k, at the moment our property is only worth about 200K.
We have been contacted by IMRM asking us what we plan to do but we have no savings and just get by with our salaries. My husband still works at the age of 67 and I work too at the age of 60. Our payments are always made on time and we have no debts, also the mortgage is in my husbands name only (which is an added burden) Will we be able to extend our mortgage or will we have to get out. I’m worried for the future, also if something happens to my husband the mortgage is in his name.
Thank you Kazmal
Sara (Debt Camel) says
Is your husband already getting a State Pension? Do either of you have any private pension provisions?
CHRIS BROWN says
Hi, I am 63 years old, my property is worth approx £165000, I have an interest only mortgage due to finish in 2022, I owe approx £120000 what are my options please ps I am retired with a small pension and a little casual labour income. Thanks
Sara (Debt Camel) says
The best thing you can do is probably try to do as much as possible to improve your position before 2022. Earn more money. Try to reclaim any PPI you may have had. Let out a room to a lodger. This sort of thing is unlikely to repay £120,000 obviously, but the more you can pay off the mortgage (or save up if you can’t make over payments) the better position you will be in 2022 to be able to look at options such as a lifetime mortgage.
Andrew Lowe says
I have a 240,000 interest only mortgage value of house is around 350,00. It expired 17 months ago. At the time of expiration I was told we would be given 18 months time to come up with something. I am 71 on a meagre pension. I cannot afford to pay the monthly payments and it is currently my children who do pay it. There has never been a missed payment. A mortgage broker I spoke to told me that his father was in a similar position and that he continued paying the monthly payments until he died. My question is, as a 71 year old, in ill health who does not want to move and probably wouldnt be able to due to health, do you think I will be forced/repossession will take place? We recently had a letter from a “home visit company” on behalf of the bank.
Sara (Debt Camel) says
Did you speak to a mortgage broker who specialises in equity release/lifetime mortgages? Could your children guarantee a mortgage?
I do not think it’s safe to assume your bank will feel sorry for you and let you stay there…
Jane says
I’m 54 with an interest only mortgage for £20k which is due Oct17. The house is worth approx. £100k. I have £40k of unsecured debts which I am entering a DMP to pay £600 / mth which would still allow me to pay a repayment mortgage for the next 15/16 years until I retire.
I realise I have left this much too late but could you offer some advice on how best to try and resolve as I am sick with worry.
Sara (Debt Camel) says
Who is your mortgage with?
Your debts – that’s a lot – is there a reason for that? Have you looked at whether there is any PPI to reclaim on any of these debts? Are any of them accounts that were opened a very long time ago?
Jane says
Mortgage is with Santander. I shared the house with my mother and took out a lot of debt on her behalf and when she passed away a few years ago I was left in a bit of a mess. A lot of the debts are credit cards and store cards which I have been paying only the minimum.
Sara (Debt Camel) says
So have you checked if there is any PPI to reclaim, for some of these accounts it may have been automatically ticked when you applied? How old were these accounts, were any opened pre 2011? pre 2007? Are they with debt collectors or the original creditors?
Jane says
No PPI, most pre 2011 but after 2007 and most with original creditors. Just starting a DMP with Step Change and hope to have all interest frozen. From my income / expenditure I could have creditors paid off 6/7 years and afford the monthly instalments on a repayment mortgage on the £20k but I don’t really know what to do as the IO mortgage is due for payment in Oct 2017.
Jane says
Hi Sarah – apologies for chasing you up but I am extremely worried that I have left this too late and may lose my house.
If you require any more information, please let me know.
Thanks,
Jane
Sara (Debt Camel) says
I am sorry, I missed your reply.
Yes you have left it very late. The best you may be able to do is to get a lodger in to maximise the income you have and overpay the mortgage by as much as possible – that is your priority, not increasing your DMP payments. Santander may not want to give you a repayment mortgage, but they will be slow to act (I would hope) if you are making very large over-payments. This isn’t guaranteed to work. I wouldn’t be suggesting it if the mortgage wasn’t so low. But there is a chance and it will improve your situation if the house does has to be sold.
Angie Grayson says
We have until 2021 to pay off our Interest Only mortgage of £132,000 and our only chance of repaying it will be to sell the house. It is currently worth about £200,000. We have to use £40,000 of our equity to pay off our debts (we are on a DMP with Stepchange) so we should be debt free by the end of 2021 hopefully..
The downside-at 56 and both working in predominantly self employed fields, we will have little or no spare cash, a rubbish credit rating and to top it all we are self employed. We don’t know what to do other than grin and bear it.
The mortgage company also want to know what our repayment vehicle is. We’ve avoided answering so far….should we tell them the truth?
Advice would be appreciated
Thanks
Sara (Debt Camel) says
How large are the debts in the DMP at the moment? How much are you paying to the DMP at the moment? Have you looked at whether there is any PPI on those debts, or any other debts you may have had? It’s a lot of debt, how did you get so much and how old are the debts? Have all your debts been marked as defaulted?
Angie Grayson says
Thanks for replying. I was ill health retired in 2008 from a highly paid job for the NHS pension. We moved out of London to buy a cheaper house but my illness meant it took me almost a year to rebuild a career : I am a piano teacher now. My husband had to build up his driving school again but again it took a long time: eventually he joined a driving school. By this time we had lived a lot of the time on credit but thought our income would build with the aim of getting a repayment mortgage. Basically we kept hanging on thinking we could sort our situation but it became clear we couldn’t….
We pay £250 to Stepchange at the moment and had no arrears so had to default to go onto the DMP. It has nine years to go.
We haven’t tried PPI claiming yet,
Thanks
Angie
Angie Grayson says
Continued….
Our debt is £38576.00 and basically began when I lost my job and my husband’s job couldn’t cover everything. angie
Sara (Debt Camel) says
Well you have 4 years in which to try to improve things.
What could you do to increase your incomes? Could you get a better paying job? Could you work more at weekends and in the evenings? Could you get a lodger if you have a spare room? You have the choice between a hard next few years and a much easier retirement.
Get going on any PPI claims and don’t use a claims firm – you need every penny back yourself. If you get any money back, see if you can use this to make a full & final settlement offer with one or two of your DMP creditors.
Are any of the debts in your DMP from accounts which were opened a very long time ago? If you have loans or credit cards that are very old, it is well worth asking for the debt collector that now owns them to produce the CCA agreement for the debt – if they can’t, the debt is unenforceable and you can stop paying it. See https://www.nationaldebtline.org/EW/factsheets/Pages/getting-information/credit-agreement-advice.aspx which has a template letter. You should do this for any debt that was opened before 2007 as there is a good chance it will work. It’s worth trying with slightly younger debts as well, say anything before 2011.
There is no magic answer here, but a few hundred here and a few thousand there will really start to add up.
Peter says
A similar situation for me. Any help much appreciated. Here are my details:
• Part IO and Part Re-payment mortgage with 5yrs 8mths term remaining
• 69k IO, no arrangement in place. PPI’d it years ago for 3k payoff
• Mortgate repayment is currently £530 (0.5% tracker above bank of eng)
• DMP with 12yrs left to run, total o/s 21k
• Secured loan of £284 pm, total o/s 30k, term left 15yrs
• Salary of 59k with a company car
• Mortgage in my name only not wifes.
I have enquired with my provider if they will extend the term to 15yrs and convert to full repayment. Would only cost an extra £80 pm. If not accepted, other ideas I have had is to get another secured loan thru a broker (due to the DMP as not fully credit worthy) to cover the DMP (I would probably be able to settle for 8/9k ie 40%) and then wait a year after DMP is settled as I would then be credit worthy. Any other thoughts?
Sara (Debt Camel) says
What is your wife’s financial situation like? How much is the house worth?
You are earning a lot and paying a tiny mortgage – why can’t you just repay the DMP a lot quicker?
Have you checked for PPI on other debts? Are any of the debts in your DMP really old?
How long till you retire and what are your pension arrangements like?
Peter says
My wife is unable to work due to illness.
forgot to mention am currently paying over 1k a month to family members for money borrowed, should last 2 years.
Have applied for all PPI for every account ever owned. This is in progress.
house is worth 330,000
I am currently 45. I have a dc pension arrangement.
Sara (Debt Camel) says
So when the loan to family is repaid you will be able to clear the DMP extremely quickly and then start to repay chunks off the mortgage. It would be very foolish to switch this for what would be a horribly expensive secured loan. A remortgage to a 15 year repayment mortgage would be good, though it would be at a much worse rate than your current one.
Ann jabakhanji says
Hi my husband and I are 53 we took out a io mortgage we owe 137000 and the house is worth 220 we have 9 years to run on the mortgage Santander won’t let us change to a repayment mortgage we don’t want to sell the house as we have three daughters which is the best way forward I lie awake worrying about this as I only have a state pension thank you
Sara (Debt Camel) says
Can you afford a repayment mortgage?
Renee Blackwater says
Interest only mortgage ends today . I am 56 and my partner is 68 We are both self employed and have savings of 30K that could go toward paying off the debt, reducing it to around £199k outstanding. I have been fretting over it coming to an end for five years. We did all of the usual, rented out rooms in our house to the point we are living in a small corner of the house and giving over the kitchen and shared living areas as communal shared spaces. This did not help to pay off any of the loan only some of the interest so that we did not get into arrears. I contacted the Financial ombudsman to see if my mortgage may have been mis sold, self cert , £240K with property valued at £320 K but it has been considered that my IO mortgage was not mis sold even though one of us (joint mortgage) would be beyond retirement age and my income alone would not cover repayments. The house is now up for sale the mortgage company have agreed to give us 6 months forbearance until we sell which meant our lodgers had to move out as we needed the rooms presentable for the sales brochure and for showing potential buyers. So far it has been impossible to remortgage due to age, regardless of the banks who say they lend to older borrowers, they will not consider us as our joint income and pensions will not cover a new repayment mortgage. Our plan is to rent somewhere and probably end up claiming social security benefits to do so.
Sara (Debt Camel) says
How much do you hope the house will sell for?
Julia Storer says
Hi,
I have an interest only mortgage of £140,000 on a house worth approx £250,000 with 15 years to go. I approached my lender with a view to overpaying to reduce the capital amount and they replied saying that wasn’t possible with my mortgage. I would like to remortgage to a repayment but due to a poor credit rating about 2 years ago, I know I wouldn’t be accepted for one yet. Any suggestions as to the best place to put any savings aside to be used to help pay off at the end of the term? I am likely to receive an inheritance of around £60k before the end of the term, so am looking at the best place to put any savings I can put aside in the meantime? Thanks.
Sara (Debt Camel) says
The problems with your credit rating – how serious are they? If you had defaults, are they all over 3 years old and have they all been paid off for more than a year?
Julia Storer says
HI Sara, There was an outstanding loan which defaulted (long story) but which will be paid in full by May next year. That’s the only issue I can see on my credit file, so I’m hoping to remortgage in maybe 3 years time.
Sara (Debt Camel) says
You need to repay the default asap, that is your top priority for spare case. With just one default on your record, if it is over 3 years old and has been paid for over a year you may well be able to remortgage.
Julia S says
Thanks Sara, I am repaying with all spare cash at the moment, when this ends in May, this is the money I would then like to put aside to save up to possibly use to repay the mortgage.
Sara (Debt Camel) says
Good – there are no great places to save at the moment – just go for an ISA but all the rates are pathetic :(
Julia S says
Thanks for your help, that’s what I thought but thought it worth asking!
Robert Ruscoe says
Hi my interest only mortgage finished in April this year there is 119.000 owing and it’s currant value is £175.000. I am 60 years old credit rating is low. I am self employed the company who are acenden which were previously southern Pacific I was told when I took the mortgage out I could be put on to a repayment mortgage after 12 months which didn’t happen, the broker who arranged it disappeared and all acenden say is they are mortgage servers not lenders. I have been paying £100 over payments for the last 12 months I am at my wit’s end with it. Thanks rob
Sara (Debt Camel) says
It is a shame you didn’t start saving up the extra you would have paid in a repayment mortgage… but where you are now is a really difficult situation. At your age with a poor credit rating the chance of another mortgage is very small.
Have you spoken to any mortgage brokers? Have you looked through all the ideas in the article above (pension? PPI reclaims)?
Having your house repossessed is the worst option fir you as it will sell at auction for less than you could get. So if nothing else will work it’s best for you to sell the house and then rent somewhere if yiu can’t afford to buy.