When an interest-only mortgage ends, you have to repay all the amount you borrowed. You can’t just carry on paying the interest.
The money to repay it can come from three sources:
- savings or investments;
- by getting a new mortgage; or
- by selling your house.
Contents
How many interest-only mortgages are there?
FCA research found that at the end of 2022:
There are now fewer than 1 million regulated mortgages outstanding in the UK that are wholly or partly interest-only. The number has dropped rapidly in recent years, halving since 2015 when there were more than 2 million.
Three quarters of these mortgages are wholly interest-only – the rest are “part and part” where part of the mortgage is interest-only, and part is a repayment mortgage.
In 2023, switching to interest only for a short period is one possible option for people having difficulty making high repayments caused by mortgage rate increases. These temporary IO mortgages are not included in the above statistics.
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.
This may be harder now mortgage rates are increasing. But the longer you leave it, the fewer choices you will have. If you are one of these people without a plan, you are risking having to sell your house or have it repossessed if you can’t repay the mortgage when it ends.
The FCA, which regulates mortgage lenders, has a leaflet explaining why you should act now and talk to your lender – even if you feel nothing can be done to help you. This may feel scary but:
- a lender can’t “cancel” your mortgage before the end date if you say you don’t have a plan to repay it;
- a lender can’t make you move onto a repayment mortgage that you can’t afford.
What probably won’t work…
“I want to carry on with the monthly payments after the end, I can afford them”
Your mortgage contract says you have to repay the full amount at the end. The FCA says:
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 option such as allowing you to carry on making your current monthly mortgage payments.
“I want to get another interest-only mortgage at the end”
A lot of people are hoping for this. But times have changed and it is now very difficult to get a normal interest-only mortgage. Your current lender is very unlikely to offer you this as an option, however much equity you have.
People coming to the end of an interest-only mortgage will probably be well over 50, and many of them will be over 65. If you will be retiring during the new mortgage that you want, it is unlikely you will meet the mortgage affordability criteria unless you have very good pension arrangements.
Many people switched to an interest-only mortgage because they had a lot of other credit card and loan debt. Unless you have cleared your other unsecured debts they will make it harder to get a new mortgage.
“Was my mortgage mis-sold?”
Citizens Advice says “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.
What can you do now?
Your options for repaying your mortgage at the end include:
- making overpayments to your mortgage. This will reduce the balance.
- 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.
- if you have credit card, loan or overdraft debt, look at whether you could win any affordability complaints about these. 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.
Take debt advice
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. You need to be clear with the adviser that you are worried about your Interest-only mortgage and want a plan for your other debts that will allow you start making overpayments to the mortgage.
Be very careful if an IVA is suggested – these typically last for 6 years and during that time you won’t normally be able to make overpayments to your mortgage – this can mean that at the end of the IVA your other debts are cleared but you no longer have enough time to try to sort out your mortgage.
Using your pension
If you are expecting a 25% tax free lump sum when you retire, using that to repay some or all of an outstanding mortgage may well be 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. In 2023 these are expensive mortgage. 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. 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 have to be over the minimum – 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.
Selling your house may be your only option if nothing else will work. Even if it’s not what you want.
It is better to sell your house yourself than have the mortgage lender go to court and repossess the house.
Getting a plan
Often you may need to create a plan that fits your individual situation, taking into account your other commitments, when you are likely to stop work, what your pension arrangements are etc.
A few examples:
- Mr A could decide to convert half his 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 car finance 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 future mortgage smaller by getting a lodger for the next few years until she retires and reducing her current mortgage by as much as possible.
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 remaining interest-only part. With more equity in your property because you have been paying it off, more options such as equity release may become possible.
Once you have a plan, it’s a good idea to do an annual check that it is “on track”. If at any point you can overpay your mortgage, this may help later if mortgage rates increase.
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Adrian says
Can you pay off with a lump sum part of an interest only mortgage whilst still within the term? ie if you have a £70,000 IO mortgage for 5 years, can you pay say £20,000 off after 3 years?
Sara (Debt Camel) says
Hi Adrian, this will depend on the terms of the mortgage. If it is a fixed rate, it is common for there to be a limit to the mount you can repay in a year, often 10%. If it is a variable rate you may be able to repay more. Talk to your lender about your options!
David says
Hi Sara, I want to pay off some of my daughter’s interest only mortgage with the Halifax. I would like to pay £100k off her £190k mortgage to reduce her monthly payments. She is I believe on a fixed rate. She has contacted the Halifax, they are being too coy about this for my liking, they say ‘go ahead pay £100k, then after 3 weeks apply to have your monthly payments reduced’. I seem to remember reading somewhere that if you’re unlucky a lender may just take the money as an over payment of interest and not reduce the capital sum owing.
Any thoughts?
Sara (Debt Camel) says
It is unusual to be able to pay 100k off a fixed rate mortgage – there are usually limits or penalties involved until the point the fixed rate ends, I think you should ask about this. You could ask them to confirm that you money will be paid off the capital amount after any interest arrears have been cleared.
David says
Thank you I’ll get her to be very sure about this.
julie bate says
I was divorced 10 yrs ago left with four small children but i saved the house by taking the advice of a mortgage consultant and getting an interest only mortgage which has 3yrs to go the mortgage is £70k my house is worth £150k the company is redstone. I have never missed a mortgage payment i am 52 and earn £30k.. I have two sons at university and 18yr old at home. I contacted company who said they could not extend mortgage and in three years i would have to get out of my home. Help what can i do
Julie bate
Sara (Debt Camel) says
Hi Julie,
It is good you are thinking ahead about what your options are. In three years time, one option might be to sell the house and buy somewhere smaller as all your kids will have left home?
Another one would be to look to get a repayment mortgage over 10-15 years with a different lender. You have plenty of equity and a good salary. The short mortgage term will make the monthly repayments quite high though – could you get a lodger to help with these?
Generally I suggest that you should assume you will need to get a mortgage in 3 years time so it’s really important that you keep a good eye on your credit record so that stays clean and that you start paying off any credit cards and loans that you have. And don’t borrow any more money…
sally says
I have had arrears on my mortgage which are just been paid off I am 55 and want to find a policy that will pay off the mortgage when it finsihes in ten years time. I have adverse credit so with the new laws I do not think i would get another mortgage
Sara (Debt Camel) says
Hi Sally, with 10 years to go, you need to get a plan together that will improve your situation as much as possible. This could involve overpaying the mortgage or making savings outside the mortgage (possibly in an ISA or a pension? An endowment policy is not likely to be a good options for many people in this sort of situation). It may also involve increasing your own income (second job? lodger?) so that you can afford to save up more. If you have good pension arrangements, then it may be that your tax free lump sum could also help.
Kay says
Hi Sara, I am nearly a the end of my interest only mortgage ( it ends on my retirement date 7/11/17) I am very stuck as to what to do. I cannot pay the money owed to the borrower and now I have no job, I have just been able to survive with accommodating students and baking cakes ,the interest only payment is very low that is why I have not done anything about my situation, but it is causing me so much stress as I don,t know where to go for help. Plus I have six small dogs to consider My house is prob worth around 200.000 and I am owing around 113.000 any ideas or options would be gratefully received other than the obvious Get out of the house.
Kay
Sara (Debt Camel) says
Hi Kay, with so little time to go, you may not be able to keep this house if you have no savings or pension arrangements that could help. Can I suggest you visit your local citizens Advice and talk to them about whether you are currently entitled to any benefits? This is unlikely to solve you mortgage problem, but I think you should investigate this,
Christine says
Hi, I have a shared ownership 3-bed house, still about 15 years left on the mortgage but am on an interest only mortgage with a company who only collects payments, previously with Capstone who are no longer in business. I have a 50% share in the property, two sons, one 21 and works and does contribute and one of 12yrs at school. I bought the house when I was in a good job, over £30k salary and then 2yrs later was made redundant. I now have a around £83k remaining on this mortgage, a frozen pension with only about £5k and also a live pension with my now employers. Do you think as I am not likely to earn enough to be able to change to a repayment mortgage, also credit history is not great although I am trying to clear this (difficult with no wage left after paying bills), my best option is to sell now? Unless I meet my prince charming or win the lottery I cannot see me ever being able to fully own the property, although I would like to buy the other half as the rent is more than the mortgage I am paying now, thus would allow me to put aside money for when the mortgage becomes due with pension monies?
Sara (Debt Camel) says
It is good you are looking at your options now – leaving it until there is 12 months to go can be a disaster.
However I’m not sure there is any need to rush into selling the house at the moment, if as you say the mortgage is cheaper than the rent.
Is there a lot of equity in the half you have? And do you have a lot of unsecured debt?
Prince Charming does sometimes turn up. And though he doesn’t have to be rich, any partner with a steady income can make a HUGE difference to your finances. And you may be able to get a better job at some point?
When your older son leaves home, then you would only need to get a 2 bed. Or even later a one bed?
Clearing up your credit history sounds like a good move at the moment whatever else happens.
Steve says
I have a interest only mortgage whose contract ended in 2014. I have kept the lender upto date, the house is on the market. They have solicitors and estate agent details. Can they still repossess the property even though I am still paying the mortgage. They are attempting to bully me
Sara (Debt Camel) says
They would need to go to court to repossess the property, but they can do this. You may feel they are attempting to bully you, but you signed a contract to repay them in 2014 and so far you have not done this… You need to look at all your options, including whether the price of the house needs to be reduced. You might find it helpful to go to your local Citizens Advice and discuss your options with them?
Elaine says
I have 50k interest only mortgage which ended in October 2015. I have some part repayment and the rest another interest only mortgage which ends in a couple of years.. My husbands work has really come together now and I have ask Santander to put all the mortgage onto a repayment mortgage. We can afford it and they have been keeping us hanging on since October last year with results of income.. I have had a telephone call from then saying that the underwriters will not let us make repayment payments and we have to find the 50k by 1st April. We are not asking for extra money we want to lay the mortgage off any suggestions
Sara (Debt Camel) says
Have you looked at remortgaging with another lender?
Tom says
My father has an interest only mortgage for £150k on a property worth a £150k which expires in the summer. I assume it was the last year of the boom when mortgage companies didn’t ask questions. He’s 66 and drawing a £12k pension whilst working part time now £15k ish. I read somewhere about the potential of some lenders offering to extend upon the basis that he would continue to make the interest payments until death at which point the property be sold and the mortgage company recover their money. Has this idea actually happened? I very much doubt there is anyway the mortgage company would let me guarantee the repayments if they were to extend but honestly can’t see a solution for him? I can afford to pay the monthly repayment cost of his mortgage if they were to offer the option to flip it but as myself and my partner are just looking to move to a bigger house to start a family even though I could afford the payments I don’t think I would get offered a second mortgage? Is a guarantee possible using my house?
Sara (Debt Camel) says
With no equity, he may not have any options that will let him stay in the house. At his age a lender would normally not be prepared to assume that his part time income will continue for 20+ years.
If you need a larger mortgage yourself for your family, you shouldn’t be considering acting as a guarantor. Or trying to get a second charge over your house.
The most likely option I am afraid is that he needs to sell the house and rent. I think it would be useful for him to go to his local Citizens Advice and look through all the possibilities, including help from housing benefit if he is renting and his part-time income drops or stops.
tom says
I’m 53 and self employed. My wife is 55 and works full time. We have a 200k interest only mortgage and a property worth 250k which ends in 2027. With no way to pay it off we can’t get another mortgage because my self employed earnings are too low. We can’t switch to repayment for the same reason. Equity release won’t cover the 200k. Apart from staying here as long as possible then selling and renting using the profit from the sale I can’t see anyway out. I was even going to look at the places that buy your house and rent them back to you but the one I contacted said this practice was on the slide
Sara (Debt Camel) says
Sell and rent back vary from the dodgy to the outright scams … basically you can’t trust that they won’t sell the house to someone else who will then evict you.
Equity release – you will be too young and have too little equity for this to be a possible option when this IO mortgage ends.
2027 is a long way away, things can change. That doesn’t mean you shouldn’t be making plans now, you should, but it does mean that there are options. They may not work completely, but they may well be better than doing nothing.
Consider what you and your wife’s pension arrangements are like – you don’t want to end up with a house but no pension, but sometimes one of you will be able to get a tax free lump sum that could help in paying off the mortgage?
You may not be able to afford to switch to a repayment mortgage, but could you overpay by some amount? the more you can over pay, the better position you will be in by the time the mortgage ends.
If you have a spare room you could get a lodger – tax free money! It may not be something you want, but you don’t want to lose your house either.
Carol says
Hi Sara
I have a house which I have been trying to sell for the last 2 years and for reasons unknown it hasnt sold. The house was on an interest only mortgage which expired last year. The mortgage company has been very good and have given me 12 months worth of extension time to try to sell it but with no luck. They gave me an extra week to try to get myself another mortgage but I had flu and despite my best efforts this has proved unfruitful. I have credit card debts which I am paying off slowly. They mortgage company gave me a cut off date of 27th April before they will start to take action. I know they will sell the house at auction and take much less on it and I will be stuck on the shortfall. This will absolutely kill me…Im clearing debt already and building my credit rating back up and I am 60 years old. All this is making me ill and I dont know what to do. I started to drink heavily to get to sleep at night. Please can you help me?
Sara (Debt Camel) says
This is a very difficult situation. In the end any house will sell if the price is reduced – you may need to consider this rather than have the house repossessed and sold at auction.
I think you should visit your local Citizens Advice and ask about what your options are for this house and also for your other debts. This must feel very scary, but it is often better to have a plan and be in control even if the plan is not what you would have wanted, rather than wait and be forced to do things.
Someone needs to help you look at your income, pension, debts, future benefits etc so you can think clearly what your options are and what is the best thing you can do now.
Emily says
I have an interest only mortgage of £88,000 with the term ending June 2016. I earn around £29,000 including state pension (I don’t have any other pensions). I’m 64. I’m being rejected by lenders for a 10 year repayment mortgage because of my age and because my income is from short-term letting out of rooms in my house. The 4 bed house is in a desirable area and worth about £350,000. I don’t have dependents or any debts other than the mortgage.
Sara (Debt Camel) says
Lenders probably don’t think you will be able to continue with your short term letting business for the duration of a repayment mortgage. With a lot of equity in your house at least you have the option of selling and downsizing to somewhere without a mortgage
Michelle says
My mother has a house worth between 250K – 270K. She has an interest only mortgage outstanding of £37000. She is 68 and has 2 years left on the mortgage when it needs to be repaid. She has looked into equity release schemes but they all seem to have high interest rates so she would be left with little equity to pass on to myself and my brother. We are, of course, not concerned by this but she is. She is therefore looking to move to an area where she could buy a cheaper property. She absolutely loves her home and she really doesn’t want to have to sell it. Does she have any other options?
Sara (Debt Camel) says
But it’s also worth stepping back and thinking of the next 20 years. She may love the house she is in but is it (a) suitable for her now (b) will it still be suitable in 10-15 years time when she may have problems with stairs, looking after a large garden, housework etc?
Is this house in the right place for the rest of the family – she could buy a mansion in North Scotland for her equity but that probably wouldn’t be very convenient? If she is a long way away from children / grandchildren, might it make sense to move now, to a smaller, cheaper, easier to clean and heat place that was also more convenient? At 68 she will make new friends and put down new roots – at 78 it is much harder.
If you grew up in this house it may have huge emotional attachment for you and you may hate to think of her leaving it just because of money. But if its the wrong size / shape / place then it may be better to move now regardless of the money.
If staying would be best though, that is a pretty small mortgage in relation to the house value – it would take a long while for equity release / lifetime mortgage to eat up all that equity, especially if she could make some payments towards it – say the payments she has been making to the IO mortgage?
jane says
Hi – Im 54 years old with two daughters – one at uni and one working full time. We need to move out of our family home which is on an interest only mge (due to their father leaving). I will have about 140k equity and I can get a mge but only for a short term (13years) which obviously makes the payments high. The area we live in the property is high , I don’t mind moving further out but to try and get a 2bed house for 250k is not large enough for us all. is Is it an option to get a mge with my daughter and have a longer term? Or do you think I could maybe get a slightly longer term based on my pension ?
Sara (Debt Camel) says
This doesn’t seem a good time of your life to be buying a 3 bed house because it seems pretty unlikely that that you will need 3 bedrooms in 5 years time. One of your birds will have flown the nest by then, possibly both!
If it was me, I would be looking for a 2 bed house with a good size kitchen/diner and make the lounge a third bedroom. Not perfect but OK for a few years and more manageable finance-wise I hope.
It doesn’t seem fair on your elder daughter to ask her to have a joint mortgage with you – she is going to want to move out at some point probably, you may not be able to buy her out and it would make it hard for her to get a mortgage herself.
You could consider whether you have any more options from your pension provision as you are nearly 55 and may be able to take some money out? But I think its important not to raid your pension any more than you absolutely have to – you could be retired a long time!
miles says
I have an interest only mortgage that has been sold by GE to Kensington.
I’m not happy.
How can they be allowed to get away with this?
Apparently, it’s in the contract I signed that they can sell the mortgage to whoever, whenever.
Never heard anything like it.
Although the letters state the contract shouldn’t change, I notice from Kensingtons letter, it states that it can change as long as they forewarn me.
What can I do?
Sara (Debt Camel) says
It is normal in any loan agreement, including a mortgage, for the lender to include a clause giving it the right to sell (or “assign”) your debt.
The new creditor though has to stick to the same terms as the original creditor. What are Kensington saying that they can change?
Tessie says
Hi I’m writing on behalf of my sister… she has a 100k mortgage which she is paying £200 interest and £100 arrears per month. She obtained this mortgage about 15 years ago when mortgages where being given out quite freely. (She didn’t even have a job to obtain the mortgage) She is a bit green when it comes to mortgages or finance matters. She spoke to someone from the mortgage company yesterday as she was requesting a statement, and enquiring about the mortgage term, she was told that if the mortgage is not paid at the end of the term the house will be sold! My sister does not work and has no pension or savings. The houses in her area are selling for about 100k – 120k. What would you envisage happening here. Or could you advise on what action she should take.
Thank you
Sara (Debt Camel) says
Arrears suggests she has had problems paying the mortgage? She needs to think if it would be better to rent – because at the moment she has what amounts to a contract to rent her house from the bank for another 10 years (assuming it was a 25 year mortgage). If she could get housing benefit, would she be better off selling the house and renting now? Alternatively she has 10 years to pay off a 100k mortgage… is there a spare room she could rent out?
Colin says
I have 49,000 left on my mortgage.of which 18,000 is interest only.i am just 60 and earn 27,000 have a pension with 27,000 in the pot.i won’t receive my state pension till I’m 66.ive been thinking of downsizing for some time as I have a 3 bedroom semi.(ex. Council house)which is too big for me.i don’t really want another mortgage.what are my options.
Sara (Debt Camel) says
Could you plan to get a lodger for the next few years – tax free income! – and pay off the mortgage as fast as possible with the extra money, then plan to downsize when you retire? It really depends how much equity you have now / will have after a few more years compared to what a smaller place will cost.
Colin says
My house is worth approximately 135,00 so I’ve got about 80,000 equity.do you think an equity release plan could work for me.ive also got about 7,000 in other debts.
Peter says
Hi, my house is worth around £65000,I have a interest only mortgage for £28000 but no way of paying it off when it ends in 2019.my children say they will buy it for the £28000 and my wife and myself can live there rent free for the rest of our lives.can this be done or can there be complications.my wife is66 and I am 68
Sara (Debt Camel) says
Hi Peter, There is almost certainly a way forward for you if your children can afford to do this, but I suggest you should all look at alternative ways this could give much the same result.
One problem with them buying your house for 28k is if any of them are made bankrupt or get divorced – obviously things you hope aren’t going to happen but if one of them did and the person owns half or a third of a house that you are living in then you could lose your home :( There could also be complications if one of you had to go into care and you had given away an asset – if you owned the house and were still living in it, it would be protected.
You could look at alternatives such as your children giving you a mortgage for 28k, which you would use to repay the IO mortgage. This mortgage could be at a reasonable rate of interest but say that you don’t make any repayment until the last one of you two dies, The interest is rolled up and accumulates so over the years the loan get larger. This solves your IO mortgage problem and avoids the change of ownership problem. As the loan carries on getting bigger it will also safeguard more and more of the house from any care home fees in future years.
There may be other options as well. A full look will also consider if you have any other debts, whether you two can afford to insure and maintain the house, and the tax implications for your children.
I think you will need to get separate solicitors to advise you two and your children, but once it is decided what should be done I wouldn’t expect this to be complicated.
deeborah says
hi my mum of 61 years bought her house on an interest only mortgage wit northern rock and expected to change the mortgage to repayment mortgage, unfortunately she was made redundant a few years ago and has struggled to repay the mortgage but she ha done without missing a payment.
she come to the end of her term in a couple of months. she loves her house and would like to stay, if sells in a few months she will get about 10k at the most!! . its going to be difficult to buy a new house as she wont get a mortgage at 61 years old. i was wondering would she be able to ask mortgage provider if they are willing to do a shared ownership, as i think she might be able to get a morgage for 35% or even 50% of the £115k,then pay rent on the other percentage, is this possible?
Sara (Debt Camel) says
I have never heard of a mortgage lender offering this sort of option – sorry but I can’t see that being possible.
Mick says
I have 2 mortgages on my property. The value of the house is £285,000 and the interest only mortgage is £130,000 and the other repayment mortgage is £10,000. I have about 2 1/2 years to go on both mortgages. Just before the crash in 2008 we were talked in to changing to a fixed rate so we have not been able to take advantage of the reduced rates that others have enjoyed. I am 58, have no savings or pension, self employed with an income around £27,000 and an adverse credit history. When we sell the house there will be insufficient equity to buy a studio flat. I wont be able to rent from High Street Agents because of my credit history so I will be sunk. Not blaming anyone but myself but this will finish me. Our interest only mortgage is with Santander and they were going to announce a lifetime mortgage (http://www.thisismoney.co.uk/money/mortgageshome/article-2814519/Santander-set-launch-lifetime-mortgages-borrowers.html) this would save us but I believe it is dead in the water?
Sara (Debt Camel) says
I don’t think Santander has gone ahead with those mortgages.
With two and a half years to go, you need to be trying to improve your situation as much as possible. Even if this won’t come close to repaying the IO mortgage, it will leave you in a better position afterwards. This means considering ways you or your partner (or both) can earn more money, even if these aren’t what you would like to do… Also consider things such as renting out a room. Getting 5 / 10 / 20k over the next few years could make a difference to your chance of getting a one bed place, possibly in a cheaper area?
If you do have to sell and can’t buy anywhere else, then you will be left with a lot of equity. If you can pay 6 months rent in advance you won’t have much difficulty renting whatever your credit rating!
Lisa says
I am stuck in an interest only mortgage but several years ago I tried to convert to repayment but my lender declined because I had some late payments. My arrears are now cleared. My parents are willing to give me a lump sum to reduce the loan amount and make my repayment monthly amount less, could I tell the lender about my parents gifting me the money? Their gift of £10k would reduce the mortgage amount and make my monthly repayment amounts less than what I currently pay. It would sort my life out.
Sara (Debt Camel) says
So your plan is to repay 10k and move to a repayment mortgage. That sounds great!
I would have thought that your lender would be happy with this – they may want a letter confirming that the 10k is a gift not a loan.
ryan says
Hi, will my credit rating be affected if i dont pay off my intrest only mortgage at end of term? And if so would this happen if evicted? Thanks
Sara (Debt Camel) says
It’s hard to be definite about what happens to credit ratings when you have problems with secured loans. But if you end up with a mortgage shortfall, that is going to show as a default at some point. And if you don’t have a mortgage shortfall you should be selling your house, not being evicted, as you will get a LOT more money if you sell the house rather than the lender sells it after repossession.
Daz says
Hi , My mom has an interest only mortage which has now finished, she lost her partner last year, and now unemployed, The property is worth £150,000 and has £67,500 left to pay, so does have a bit of equity. The best option I can see is a equity release for a life time mortage, but as she is 61 and no income, but £33,000 in savings. The adviser works it out the equity would be £45,000 and would need another £25,000 from her savings to pay off the mortage. Would you think this would be correct and would the other option be selling the property, but this would mean getting another mortage again?Thanks
Sara (Debt Camel) says
I don’t know if you have been talking to a specialist adviser, some of the figures you mention don’t seem to make a lot of sense.
I think your mum should go to her local Citizens Advice who can then look at her general financial position. After that if she wants to look at equity release or a lifetime mortgage I suggest consulting a specialist adviser, find one near her on this search page: https://directory.moneyadviceservice.org.uk/en
I hope she finds a good solution.
jo ebbs says
Hi We have a property worth around £550.000 and an interest only mortgage with a very small repayment plan of £200.000. We would
like to stay here and the mortgage has got 61/2 years to run. What would be our best move to continue to live here. Would we be considered
by a lender to remortgage we are 68 years of age and self employed.
Sara (Debt Camel) says
By the end of your IO mortgage you will both be 74? At that age and with such a lot of equity there may well be equity release / lifetime mortgage options at that point, but of course that can’t be guaranteed.
You will maximise you chance of finding a good option then if you can start overpaying the mortgage now? You say the repayments are very small, so if you can take advantage of this to chip away at the mortgage, then you will need to borrow less later.
You haven’t mentioned any unsecured debt – it would also be good to have as little of that as possible. You don’t want to get a new car on finance a year before you are looking for a mortgage!
Neej says
I have an excellent credit rating and have a flat on a interest only mortgage coming to an end soon. The flat is worth around 190k and I owe the bank the same amount, can I just had the keys back and walk away , will this impact my credit history and other properties I own.
Sara (Debt Camel) says
If you hand the keys back and walk away this is likely to lead to a default on your credit rating. The bank at some point will sell the flat but this may fetch much less than you think it should – bank repossession sales often do. At that point you will need to make an arrangement to pay the mortgage shortfall or the bank may decide to go for a CCJ and a charge over one of your other properties.
This is not a good plan of action. It would be much better for you to sell the property yourself. Presumably any shortfall then would be small and you could make an arrangement to pay it.
Ruth Williams says
My partner has an interest only mortgage on his property & it ended 2 months ago. The mortgage was in his & his wife’s name, but she died about 10 years ago. He received a life policy payout which would’ve paid the mortgage off, but he didn’t do this. He has no repayment plan in situ. The property is worth more than is owed which is good i guess. But he is self employed & has no way of proving his income. What can he do?
Sara (Debt Camel) says
Well unless he (together with you perhaps) can get a mortgage, he is going to have to sell it. He can use his accounts for the last two years to prove his income to a lender.
At this point it’s hard to see what other options there could be unless someone in his family has a lot of money to bail him out? The worst of all worlds would be to refuse to do anything so the house is repossessed – you would be able to sell it for more than the bank would.
Ruth says
I am unable to help him financially as I have my own mortgage, bills etc. I don’t think anyone in his family can afford to help him out either. As for accounts I don’t think he has any. Looks like his only option is to sell it then which in turn will make him homeless.
Is there an option where he could rent it out maybe?
Sara (Debt Camel) says
No he won’t be able to get a mortgage and then rent it out.
He won’t be homeless because you said there is some equity, so he can use that as a deposit to rent. I suggest he should go to Citizens Advice and talk through his options – he may also need advice on what benefits he is entitled to.
Ruth says
Thank you Sara I will pass on your advice.
Sheri Ahmet says
hi my husband and i have interest only mortgage of £50,000 which matures 2022, we have two endowments both will have shortfall but we have some savings to cover this. my question is, one endowment matures next month with £10,000 aprox……we are considering paying off some of the capital amount with it, however i wondered if it may be better to finish with both endowments and see if we can switch to a repayment we both have a goodish income and the house has 200,000 equity…..or is it better to let the second endowment run to finish at this late stage would we be missing out not letting it mature? thank you in advance
Sara (Debt Camel) says
I can’t give advice on whether its better to keep the second endowment or not. You would need to talk to a financial adviser. And no-one can predict how an endowment will perform over the next 6 years…
A few things to take into account:
– your endowment provides you with an element of life assurance. If you cash in the 2nd endowment and pay it off the mortgage you may want to think about some extra term assurance for you and your partner? This may not be expensive, it’s just something to think about.
– you could keep the second endowment going but start overpaying the mortgage by a bit. Say you expect the endowment shortfall to be £15,000. £200 a month would repay that over the rest of the mortgage.
– if you want to get a repayment mortgage for more than 6 years, this would be a good time to get a quote and see what it would cost. You don’t want to make the term longer than you have to as that prolongs the time you are paying interest.
Sheri Ahmet says
thank you for your reply…..i have talked to the mortgage company and booked an appointment to talk through maybe changing to a repayment mortgage, but i had this idea after your reply that if we could pay into a savings account £250 for 60 months that would cover it and no need to lose our endowment with the life insurance either…..leave the endowment to run the last 5 years….
Sara (Debt Camel) says
Yes, good to make the decision in next few months whilst you have all these options.
David says
My interest only mortgage for £100 000 is due to be repaid in April 2020 when we will both be 60 years old. House value is £145 000 following recent survey. I am on a debt repayment plan till 2023 so idea of remortgaging is zero. I have two sons that already each have a mortgage with their partners and was wondering if they would be able to obtain a mortgage for £100 000 to buy house or can they only have one mortgage. Also, if the worst comes to the worst do mortgage companies give a short period of time beyond due date before repossessing property?
Thanks in advance
Sara (Debt Camel) says
It is possible to have 2 mortgages – your sons would be buying your house as a BTL property. I am not recommending this – I have no idea if your sons can really afford it. Even if they can at the moment, this sort of arrangement can go badly wrong in future if one of them wants to move house and get a larger mortgage themselves, of if one of them gets divorced, goes bankrupt or even dies. If you want to pursue this sort of arrangement all three of you will need to take separate legal advice and draw up an agreement.
Elizabeth says
Hi I’m 40 my hubby is 52. We have a 4 yr old little girl. We have a house worth £200,000 and interest only mortgage for £147,000. We have no way of paying this off it has 9 years left in the mortgage. I earn appro 14k employed and run by own business and got 58k from this last year. My hubby earns 22k. We are looking to swap to repayment. Do you think it will be possible by some mortgage calculations it says yes. However others say no. My hubby does have an endowment that matures next year and is worth 30k. However he hardly has a pension. So don’t if to use this on the house or save for him. Can you help.
Sara (Debt Camel) says
Hi Elizabeth,
I think you should talk to a mortgage broker about what your options are for a repayment mortgage are now and how they will change next year. This will depend on things like your other debts and your credit record, also the term of a repayment mortgage.
The decision about whether to use the endowment to reduce the mortgage a lot or put it into a pension is difficult. It may well be however that the only way you can remortgage is to use the endowment money.
Eliza says
Hi I’m a single parent of two at the end of a IO mortgage term which ends shortly, (within months) I have been looking at all sorts of options this last year but as I’m currently self – employed without business accounts to show for more that £13k per annum I’m not able to get a re-mortgage at this time for that amount. I owe £74 k to the lender and my home is worth somewhere between £230k and £270k. they have told me they are not legally able to extend the term despite having no late payments and an excellent credit rating. (is this true?) Once my youngest child reaches Secondary school (September 2017) I will be in a position to return to full time work and remortgage for a decent amount, but obviously I am not in a position to do this immediately.
I have been looking at maybe finding a private investor over a 2-3 year period because that’s all I need (possibly returning them £100k for their £74k outlay or somesuch figure) or even trying to get a guarantor mortgage with a friend I have as a guarantor. the equity in my house is guaranteed as it is an unusual property with lots of further potential. What do you think are my chances of this, and is it even a sensible option?
Despite having equity in my home it will not be enough to buy a property for myself and my children, and the whole lot will disappear in rental in a very short period of time.
Have you any advice?
Thanks, Eliza
Sara (Debt Camel) says
Your IO mortgage ends when it ends. The lender is not obliged to let you continue to live there if you continue to make monthly payments. On the figures you quote it would be very hard for you pass the affordability criteria for a new mortgage.
Finding a private investor to give you a secured loan sounds like a very bad idea to me. You would be missing out on a lot of regulatory protection. There is frankly a risk that you would end up borrowing from a shark whose main interest would be getting you out of the house as soon as possible. It is illegal for anyone to lend money in this way as a business without regulatory authorisation. What if you couldn’t work because you or one of children was ill? Or you couldn’t get a job that would let you remortgage for 100k? If you want to pursue this idea, you need to talk to a solicitor – one chosen by you, not recommended by the person you are considering borrowing from – about all the pitfalls and what fair legal contract would look like.
I can’t comment on the guarantor mortgage idea as so much would depend on the circumstances of your friend and the costs of the option. If your friend is interested, I suggest you talk to a mortgage broker sooner rather than later so you have a feel for whether this is realistic.
You have 130-200k in equity. This is not all going to disappear if you rent for a year. This may actually be the cheapest, less risky option for you.
The other thing you should look at is getting full time work now and finding a way around the childcare problem for your youngest as it is only a year.
Jane says
Hi. I have an interest only mortgage and no way of repaying it when the term ends this year. Bad credit rating etc. etc. I am looking at one option of renting my house out for the next 10 years in order to accrue some extra funding. The rent I can generate from it exceeds the mortgage repayments. Maybe going into rented accommodation or a residential static caravan site while this happens and to wait until there is more equity in the house before selling. Do you think this would work for my situation?
Sara (Debt Camel) says
Unfortunately renting the house out for the next 10 years isn’t going to work. This would require the lender to give you a new mortgage, which isn’t going to happen if you have a bad credit rating and other debts.
I think you need someone to sit down and look at the details with you – in this sort of situation there can be a lot of possibilities, so it makes sense to explore them all. You don’t say how old you are, so I don’t know if your pensions are relevant. Could you go to your local Citizens Advice and ask for an appointment with a money specialist?
Denise says
Hi, I only have 15years left in order to pay off for my £117000 interest only mortgage, I have no way of repaying this off by then, my credit is bad, and I am not allowed to rent out my house according to my contract. I have a sixteen year old daughter at college and I am really worried that I might end up without a home very soon.
Have you any suggestions around this please?
Sara (Debt Camel) says
You said there were 15 years to go, this seems like a pretty long time to me?
How much is your house worth at the moment? Why is your credit record bad, do you have a lot of unsecured debt?
Tina says
Hi our interest only mortgage is due to end next September . – we do not have any debts however our mortgage company got took over by a bank & they were not intested in doing part & part previously so we stayed on interest only. We both have better jobs now and could consider remortgaging on repayment terms responsibly – we are in our early 60’s but not considering retiring. Do you think we could remortgage. Our house appears to have increased its value. The difference in the value of the property & the amount we would need to remortgage is approx£14000. – we would be looking at maybe a 10yr mortgage. Are you able to offer any advice please?
With thanks
Tina
Sara (Debt Camel) says
£14,000 over 10 years is a pretty small monthly repayment, if your credit ratings are good and you have no other debt you may well be able to remortgage. I suggest you don’t wait until next September, talk to a mortgage broker about your situation as it may be better to remortgage now rather than wait a year.
Tina cross says
Hi thanks for your quick response however I think I might have made a mistake or something as the amount we are looking to remortgage is £119000. Obviously this makes a load of difference – I was wondering if you had any idea of what we would be able to get on a remortgage? I am assuming if we were able to pay a lump sum that might help? Although we would have to take a loan out for that. The £14000 is the difference in what our original mortgage was and today’s value of the property. Not sure if that makes a difference or. Not.
Thanks for your help
Sara (Debt Camel) says
Ah sorry I misunderstood what you wrote. a £114k repayment mortgage over 10 years would require monthly repayments of a thousand or more – can you afford that? If you can, talk to a broker as I said.
Getting a loan will not help with this – it will reduce the mortgage amount but it will increase your outgoings by more … that would affect the mortgage affordability calculations and make it much less likely you will be offered a mortgage. At this point and until your house situation is resolved, it is best to avoid taking on ANY extra credit, including things like car finance.
Tina says
Thanks for your reply. I’ve actually booked an appointment to discuss a remortgage & I agree about the loan- apparently there’s a possibly that we could remortgage and if we put added a few grand to begin with we could borrow less on the mortgage and the repayments would be around about £900 – we would have to be careful but we could manage that. The other choice is to sell the house now as the price is better than we paid and move into rented – we need to seriously think about what’s best – not sure what’s the best option for us really!
hank you for all your help
Maxine says
Hi
I have an interest only mortgage which came to an end in 2013 I have an outstanding capital balance of £23K. The property is valued at 79K. My plan was to change to a repayment mortgage after completing a degree and making a career change as a social worker 3yrs ago. However I became really ill and I am now presently living on ESA/DLA. I have no savings or pension in place. The mortgage company are now stating repossession after 2.5 years of talks. I have been told I am too young for equity release 54., I also have adverse credit. I am presently able to pay £350 a month over 7years however the lenders are not interested in this offer due to my credit score and employment status.
I am now living in stress not wanting to sell my two bedroom house after living here for almost 30 years.
Please do you have any advice.
How long could repossession take.
Sara (Debt Camel) says
Hi Maxine, you need some detailed advice on this. Good places to go are your local Citizens Advice, a Law Centre if there is one nearby or by contacting Shelter
Roger Taper says
Mortgage comes to an end of term in May 2017 . Owed £300k , house is worth £670k , have put it on the market to downsize , on the market since Feb 2016 , one purchaser fell through no go ,the lender was informed more than Yr ago we will sell and downsize / the clock is ticking causing stress / what will the lender say , we are trying very hard to sell , Brexit has caused the delay , houses selling but slowed down ?
Sara (Debt Camel) says
It sounds as though your asking price may be unrealistic in the current climate?
Sid says
We have a £185,000 interest only mortgage due to be paid off to Santander in 2020 and we have no associated repayment fund (we did have garbage endowment policies that bombed badly). We have also been working with a Stepchange Debt Management Plan for several years so have unsecured debts too !
The house is currently worth just under £300,000. Plan A is/was to sell the house, pay off the mortgage and move to renting. We have joint earnings of around £35k. That Plan is now looking less desirable than was the case a few years back as we still have three 18-21 year olds at home and if they are still with us in 2020 then renting something for five “adults” is looking a bad idea !
Despite the Stepchange DMP, we have never missed a mortgage payment ever so will there be any likely chance of Santander offering a workable solution to at least extend the mortgage until such time as we can sell and downsize ? After all, with a £300k house there can surely be zero risk to the lender.
Alternatively, is there likely to be options available in the years to come – given the growing awareness of this issue and the hints from government that financial institutions SHOULD be looking to offer something rather than kick people out ?
Any thoughts appreciated !
Sara (Debt Camel) says
I doubt Santander will think your adult children are a good reason why you can’t downsize. I think your children need to be told they have to plan to be living somewhere else in 3 years time. It would be unwise to plan on any other basis – and unfair not to let the children know the situation.
Steve says
Hi Debt Camel,
I have a second home with a 107k interest only mortgage which runs out in 4 years. I have no savings to pay it off and the house (which I would love to sell) has recently been revalued at 97k.
If I try and remortgage with a repayment mortgage are the lenders likely to only offer me the 97k rather than the 107k?
In your opinion is my main family home at risk if I cannot pay off the 107k lump sum?
I have no chance of equity release as I’m 40 years old even though my main home is worth 200K with a 90k mortgage.
Do you have any ideas or recommendations – should i just take the 10k hit on the property and sell it?
Thanks for you time
Sara (Debt Camel) says
If you would love to sell it, it presumably isn’t generating enough in rent (assuming this is rented out?) to cover a repayment mortgage.
If you want to remortgage it, the starting point for the lender will be its current value, not what you paid or the size of the current mortgage. To make this work I would guess that you would probably have to remortgage you main house for an extra 30k so you could look to get a 77k mortgage on the second house. (NB it would be better for you to talk to a mortgage broker to get a good feel for this, don’t take these figures as being accurate!) Whether you CAN do that will depend on the mortgage affordability tests. Whether you should WANT to do it, well the fact that you would like to sell the place suggests No!
If you do nothing, ultimately the house will be repossessed and sold, possibly for less than it is worth. You would normally get a better result from selling it yourself. Any mortgage shortfall will then become an unsecured debt, but the lender may then want to try to get a charge on your existing house unless you can reach an agreement to repay it in a reasonable time.
All this is of course in the future, if you can save up / overpay the IO mortgage enough over the next 4 years then there may be no shortfall. Then there is the question of what house prices may do over the next 4 years – can’t help you on that one except to say be realistic!
Jane says
Hi there,
Thank you for a superb easy to understand article.
I have an Interest Only, £93,000. Due to be repaid in exactly 8 years time.
I am a disabled widow aged 53.
I have a very small endowment which was for a retirement trip to alaska. This will be approx £11,000 in 3yrs time.
In 3-7 years time, I get a small cash sum from my civil service pension, £15,000
I have just started a set one year high interest savings which will payout £2,465 next year
Obviously it makes sense to pay these sums off my mortgage.
However this still leaves £64545 to find/pay in 8 years.
Will paying off these lump sums decrease the interest, or the length of the mortgage?
Or do I simply make overpayments with any spare cash? E.g; from £50 to £500 depending on my circumstances at the time of random overpayments?
Santander have offered to change me to a repayment mortgage, however at the moment, I cannot afford the extra from my benefits.
Will they still offer this once I’ve reduced the capital loan?
Sara (Debt Camel) says
Lenders are usually very happy for you to make overpayments and / or switch to a repayment mortgage in this sort of situation. Paying lump sums off will usually decrease the interest, not the term.
But I think you should go to your local Citizens Advice and look through all the options, including the timing of taking your pension – you may get a much higher pension the longer you can leave it
Chris says
Aged 64 I have five years to run on a £207k IO mortgage with Halifax which due to ill health early retirement I cannot repay. I have worked on what I believed to be my only realistic option which is to sell and use the equity for a retirement property. Recent valuations give the equity value at around £85k dependent of course on the prevalent market.
Is selling the only option available to me? I must say that Halifax haven’t been the easiest or most accommodating bunch to deal with when approached for advice (other than their statutory leaflets and prompting to find a “solution”) and so some simple, useful and practical advice would be most welcome.
One very strange anomaly is that I currently hold a mortgage – upon which I make up to date and regular monthly payments – which I would be unable to obtain given my lowly current occupational pension! Halifax appear disinterested in my circumstances and seem content as I long as I keep up payments!
Sara (Debt Camel) says
Hi Chris, in defence of Halifax, they are lenders and are not authorised to give you debt advice or general financial advice. And resolving an IO mortgage situation often requires both of those.
If your mortgage was ending now you would probably have little option but to sell. But could your situation change in the next 5 years?
Well for a start you will begin to get your State Pension in the next year or two (check the exact date here https://www.gov.uk/state-pension-age), so that will increase your income but it may mean that any benefits you are currently getting will reduce. If you play around with a benefits calculator (https://benefits-calculator.turn2us.org.uk/AboutYou) pretending you are getting the SP now you can see what is likely to happen.
What else can you do to improve your situation? if you have a spare room, getting a lodger would be tax free income. See if there is any PPI you could reclaim. Look at ideas for making some money working from home https://debtcamel.co.uk/improve/increase-your-income/. These aren’t going to pay off a 207k mortgage, but by repaying a few thousand a year more the 85k equity could get quite a bit larger.
And of course house prices could go up. But you can’t plan on that happening.
The other possibility is that in 5 years there may be more mortgage options that there appear to be now. The mortgage industry is looking more at the problems of products for pensioners, this may help. If you can get the 207k mortgage down that could make all the difference.
Chris says
Thank you, Straightforward and honest advice which I value greatly.
Reinforces my own thinking as I was exploring any other options – which look in short supply. I wonder if the market (or even our laissez faire Government) will develop “products” to help all those hundreds of thousands of people (around 940k in some reports) in similar situations to mine?
As you have deduced I will face an abatement of some of my State Pension under the new system – as I was contracted out for many years – but even with that taken into account my potential for a mortgage loan would be £100k at the most.
However, a smaller home – possibly under shared ownership through one of the many over 55’s schemes – is possible and my intention is to get the ball rolling whilst I still have the energy and little grey cells available to do so. Clearing the attic and cupboards of all the accumulated detritus of a lifetime makes sense too as it’s a rotten job for the family once I am “past it” or simply not around. A list of passwords will help too, just in case!
What a Great website and I will certainly point others in need of independent information and advice in the direction of Debt Camel.
Thanks again
Chris
Tim says
Hi: Just wondering what options IO mortgages have when they renew. Presumably I could flip to the SVR, (expensive) but what is the motivation of the mortgage company (Virgin Money) to re-offer me an IO for another two years? It’s a large IO mortgage, but at 47% LTV. Also have you seen mortgage companies increase IO mortgages to enable me to extract some equity ?
Sara (Debt Camel) says
When you say “renew” do you mean then the mortgage ends? Or when a mortgage fix ends?
Do you have a good plan in place to repay the mortgage when it ends?
CB says
I have a interest only mortgage with woolich that expired in 2014. the property has been on the market ever since but has not sold albeit being reduced twice.
how much time have i before eviction? i am up to date with payments and am over paying the value is 299 mortgage 177 i understand that government has said that this is not an option for the lender can u advise
Sara (Debt Camel) says
I’m sorry but it’s not possible to answer your question. The mortgage lender could start possession proceedings in court at any time – if they already have, go to your local Citizens Advice or phone Shelter 0808 8000 4444 urgently.
CW says
My husband and I have £20,000 on an interest only morgage which will have to be paid up in March 2021. My husband is 80 and I am 72. We downsized to a bungalow but it needed a lot of work hence the £20,000 we still have some of it but cannot save the rest in the time we have left, my husband doesn’t want to move again and I do not want to go with equity release. Do you see any other options for us. I have not been well otherwise I would get a job to save the money and my husband is against me working We worked all our lives.
Sara (Debt Camel) says
Hi CW, I agree with your husband, if you haven’t been well, working isn’t a good idea! Also the idea of moving at 77 & 85 if you don’t have to for health reasons isn’t appealing. I think you should revisit the idea of equity release in about 4 years time, see what is on offer then. This isn’t a huge amount of money you need and the equity release terms tend to be better the older you are.
CW says
Thank you for your reply it’s good to have someone else look at the options
Katie says
I have an interest only mortgage with 9 yrs left. This was taken out in both mine and my ex partner names. He has never contributed to any payments and left a few years ago and I don’t know where he has gone. I have tried to get the mortgage put into my sole name so I can switch the mortgage to a repayment one but they say I need his permission and then apply for a sole mortgage. With no address for him and time running out what can I do.
Sara (Debt Camel) says
Can you over pay the mortgage? Some will let you overpay by a certain abount – if you can. do this. If you can’t, or if the amount you can overpay isn’t enough to repay the mortgage in 9 years, set up a standing order to transfer the extra to a savings account each month. This isn’t as efficient financially as paying it off the mortgage but in these days of low interest rates it’s not a bad option. This will mean when the mortgage gets to the end, you will have a large pot of money to repay much if not all of it.
I assume you have tried to trace your ex’s parents and any friends who may know where he is? If after another few years there is still no sign of him, go to your local Citizens Advice or a Law Centre and ask what you can do about getting his name removed from the mortgage.
Linda says
Husband and I have an IO mortgage of £160,000, on house worth £300,000. The mortgage ends in 2years. The equity of approximately £140,000 gives us very limited choice re purchasing new house/Flat. I am 59 and husband 64 yrs old. Husband self employed and I work part time. Taking out a repayment mortgage is not an option. I have a v small work pension of £38,000. I’m tempted to reduce mortgage with this, so that when our IO mortgage ends we will have more equity/money and choices to buy a retirement house/ bungalow/ Flat. The pension is very small when tax deducted and monthly drawdown calculations given. Is this a wise move?
Sara (Debt Camel) says
Hi Linda, this is the sort of situation where you do need to look at all the options, including things like getting a lodger for the next couple of years? That could make a real difference to the choices you have at the end of this mortgage.
Could you go up to full time for a while? Have you looked at reclaiming PPI?
I suggest you talk to Pension Wise about your options. You could take all the money out now, take 1/3 this year, 1/3 next year and 1/3 the next year which MAY reduce the tax you pay? Or take it all out at the end – I’m not sure what extra benefit you get by taking the money out now rather than waiting until the mortgage ends? If you are currently contributing to the pension then could mean it is going up?
Louise says
My friend has a mortgage with Bank of Scotland. The term ended in October 2015 and he was given another year to repay the loan, but despite the house being marketed and still is, it has not sold. The bank have now said that they are going to levy a daily charge which relates to double the monthly mortgage, payable when the house is sold and until the mortgage paid off. Are they legally allowed to do this and is it the best option to avoid repossession ? He cannot submit income figures to them as they would not offer another mortgage option on the sight of these as his income has reduced although regular mortgage payments have been made.
Sara (Debt Camel) says
Hi Louise, I am afraid your friend needs to take some detailed debt advice on what his options are and what he should be saying to Bank of Scotland. I suggests he goes to his local Citizens Advice. He is still a customer of the Bank of Scotland and they have a duty to treat him fairly. But this mortgage needs to be repaid and if he is refusing to supply them with his income details and the house has been on the market for so long they may have decided that he isn’t serious about trying to sell it. This may be less a question of what they are legally allowed to do – because legally they could probably start possession proceedings – and more a question of what can be negotiated.
Louise says
Many thanks Sara.
peter says
we have an IO mortgage of 330k and house valued approx 700k both wife and i are self employed and earning around 70k and 20k. mortgage term ends in april 2017. the mortgage broker who sold us the mortgage has apparently committed suicide due to fraud. havent got a clue what to do.
Sara (Debt Camel) says
How old are you both? Do you have savings, endowments, pensions? Other debts?
peter says
54 and 51. no savings or endowments. have about 15k unsecured loans.
Sara (Debt Camel) says
Have it talked to a mortgage broker about how large a repayment mortgage you can get? If it isn’t 330k, tHe obvious thing is to sell the house and trade down to somewhere you can afford with a 10 years repayment mortgage. Look at whether there is any PPI you can reclaim (don’t gap through a claims firm, you need every penny yourself!) – that may enable you to clear some of your unsecured debt.
E sturgess says
I’m very worried about my parents both 76 and will be homeless very soon. They have an interest only mortgage and no way of paying the mortgage off. So they will need to sell their house in 3 years time. Due to ill health they got into debt and step change have helped enormously by working out re-payment programmes. However, the house is worth around 130,000 and the mortgage is 80,000 but when they sell they will need to settle the remaining debts which stepchange handle for them. This will only leave them with about 40,000 which isn’t enough to do anything with. They are considering buying a caravan to live in which really worries me due to their ill health. They have looked into renting but are worried they can’t afford the monthly re-payments. Are there any options for them ?
Sara (Debt Camel) says
Once they are renting, if they can’t afford the rent they will be able to get help from Housing Benefit. Like you I don’t think a caravan is a good option for elderly people not in good health.
Helen Toon says
The contractual term on my interest only mortgage expired in August 2012. My mortgage provider continued to allow me to live in the property until the end of Dec 2015 when they threatened to repossess the house. I have since managed to redeemed the property in full. My contractual term with the initial provider before the mortgage was sold was based on their interest rate (2. 05%) plus variable Libor rate.
At the end of Aug 2012, they wrote
to me stating that my interest payment was to be fixed unless the house was fully redeemed. I was not able to do so then, but I continued to pay my monthly payments until Dec 2016 when it was fully redeemed. Was it right or fair that my lender continued to charge me higher interest when the Libor rate from Aug 2012 to Dec 2016, as that of the bank of England base rate, had dropped significantly? Please shed your thoughts on this. Thank you.
Helen
Sara (Debt Camel) says
Your mortgage contract ended in August 2012. Your lender could have repossessed the property a few months later. if they had kept you on a variable rate they may have moved to evict you. If the lender had decided to increase your rate, making your position harder, I don’t think that would be reasonable. But it’s not clear to me that you have been unfairly treated.
Andrea says
Is it possible on an interest only mortgage to offer the mortgage company less money than is owed as a settlement?
Sara (Debt Camel) says
Well you can offer – but I would be very surprised if they accepted. Why should they?
James Hawkins says
My parents (79 / 76) are approaching the end of their interest only mortgage term timed to coincide with my father’s 80th birthday – the mortgage (£300k) was converted from repayment to Int only when they got in to difficulties some years ago – although they have since managed to pay the monthly amount without fail.
For many reasons they hadn’t taken the necessary steps to sell their property which is now valued at between £600 – 750k although they are, now actively marketing it through estate agents.
They are seeking an extension to cover the period until sale but the lender is (currently) refusing. Do they have any rights or protection because of their age?
Sara (Debt Camel) says
No. But if they are really actively marketing it, then the lender will prefer this to go through rather than start repossession hearing. £600-£750k is a huge variation though. Actively marketing a property doesn’t mean listing it with the estate agent that quotes the highest price and refusing to take any offers…
If you want to help them, often the most practical way is to go round and help them declutter. If they are downsizing, then they probably need to cut down on a lot of “stuff” – not put it in storage! It can be pretty hard for older folks to do this, and a cheerful son with a car to cart stuff away can be a morale booster.
James Hawkins says
Ha! Many thanks
I haven’t seen the Ts & Cs of their current mortgage but assume that ‘transfer of ownership’ through repossession is not something that just happens beyond the end date and that there is likely to be discretion to carry on under a special arrangement? Do you think they may ask for a formal valuation (to assure them of their security)?
Concur the variance (in assumed value) is great and I cited it from a slightly jaundiced point of view ie it is being marketed for £750k but (yes, through clutter but also because I don’t have huge faith in the estate agents in their area) suspect they will realise less than that.
I agree that the lenders should take a pragmatic view and have head that the Government is actively discouraging repossession of older people (because it is likely to become THEIR problem) but what do you think may be a reasonable time? If my parents refused to accept offers of say £600k per the above scenario and held out for more, are they obliged to tell the lender?
James Hawkins says
In other words – what do think constitutes ‘actively marketing’?
Sara (Debt Camel) says
The T&C’s will say nothing about what happens after the end of the mortgage – there are no provisions for extra arrangements. (Well I suppose in theory there could be, But I have never heard of this happening.) The mortgage ends at the end date, at which point your parents will owe the lender the amopunt borrwed and the lender has a charge over their house so they can repossess if it isn’t paid. The lender will have to go through appropriate steps before commencing legal action so eviction will not be the next day, it will take a few months.
The lender has discretion not to start possession proceedings. I don’t think you should put any weight on the idea that the Government is actively discouraging repossession of older people. Who is the lender? High street banks are likely to allow more time than sub prime lenders in practice.
They are unlikely to ask for a formal valuation. 2 minutes with Zoopla should convince them there is surplus equity in the property, this is hardly a marginal case.
If possession proceedings are started, part of their defence should be that the property is on the market. A letter from the estate agent confirming the advertised price and any offers received so far will help. If an offer has been accepted, a letter from their lawyer saying how far through the conveyancing process it is. But if possession proceedings are started – assuming the lender has gone through the correct procedures – then the best they can hope for is that suspended possession is given for a set length of time to enable a sale to go through.
You should encourage your parents to talk to Shelter https://england.shelter.org.uk/get_help/helpline about this process, what the lender has to do and what they should be doing.
charlotte says
My ex and I split up 11 years ago and I had to remortgage to keep the house. I have an IO mortgage of £179,000 and have 16 years left on this. I am in a 2 bed house and have one son who is 13. my salary is £24,000. There is about £170,00 equity in the house. I wanted to remortgage so I could do part repayment part interest but unfortunately I don’t have a big enough salary to be able to remortgage to what I need. I was thinking of overpaying on the mortgage so I set up a standing order and pay in about £100 a month so at least its a bit off on the mortgage. Are there any other options for me seeing as I have so much equity in the house?
Sara (Debt Camel) says
Overpaying is the perfect option in your situation. Not only is it chipping away at the mortgage, but it is flexible, so if you don’t want to make a payment one month as you have a big car repair bill or something, you don’t have to make it. When your son leave home, you may be able to get a lodger for a few years, that could make a big difference. And your salary may rise. But in the meanwhile, making a start is the best thing to do even if you are worried it is too small.
charlotte says
thanks for quick reply. Are there any other options though seeing as I have so much equity in the house?
Sara (Debt Camel) says
Can’t think of one!
Sandra says
Hi,
Can the mortgage company Reposses the property from you during the mortgage agreement if you are unable to provide proof of savings etc to pay the balance at the end of the term? All payments are up to date
Sara (Debt Camel) says
No, if there are no arrears, there are no grounds for repossession.
If you are concerned there is something unusual in your mortgage that may require this, I suggest you talk to Citizens Advice or Shelter https://england.shelter.org.uk/get_help/helpline .
Sandra says
Hi Sarah ,
That’s great, thank you.
Allie says
Hi,
My husband and I are separating over the next few months. The house we are in is worth approx £430K with £152K IO mortgage that is due to end in September this year. He have a couple of liens (debt from many years ago) on the property (worth £32K). I am 53, my income is £30K, I work full-time. My 18yr old has just gone to Uni, my 24 year old lives with a partner but is still registered at the family home. I have no pension to speak of, no savings, and some debt that is paid at a small amounts each month. The debts are not on a credit report as they were so old and sold on so many times. My current mortgage lender had tried to re-possess the property 3 times in years gone by due to arrears, but we managed to keep it each time. However it has been paid on time every month for past 8 years (as have all my other outgoings).
Do you think I would be able to get a mortgage to enable me to buy husband out and stay in property? If I am staying in the property does the lien have to be paid or could I keep that whilst I am keeping the house.
Any advice appreciated, I want to try to avoid renting if possible.
Ideally I would like to keep the property by getting a mortgage in my name (or mine and my daughter’s – although she only works part-time waiting on tables)
Sara (Debt Camel) says
To buy your husband out, you would need a mortgage of over £300k as you needto repay the IO mortgage, pay your hudsband his share of the equity and repay the other liens as well (or no-one would give you a mortgage). That isn’t going to happen on your salary and with you having other debts in debt management.
Adding your daughter in is very unlikely to change that and would in any case not be fair to her – at some point over the next 10 years she will probably want to leave home and then having her name on your mortgage would be a real handicap, and it isn’t easy to get your name removed from a mortgage.
Sorry, not the answer you are hoping for.
Allie says
Many thanks for your comments Sara, it is helpful to have at least aired my situation. As I feared, it sounds like sell and rent is my only option after all.
Wondering says
Hi am on interest only mortgage. I want to go n live with my partner .can I sell my house to family .I have had late payments on my mortgage but I am up to date now
Sara (Debt Camel) says
If you will be selling the house for more than the mortgage, then the lender can’t stop you you doing this. You do need to make sure you are getting a reasonable price though, even if it’s family. That money can make a lot of difference to you in future.