If you have an interest-only mortgage, you may find yourself in a difficult position when it reaches the end of its term
It’s estimated that 600,000 interest-only mortgages will be due for repayment by 2020. And just under half of all interest-only borrowers are expected to face a shortfall*. For those with an endowment policy, the average outstanding balance stands at £55,000. That rises to a staggering £121,000 for those without*. If you are coming to the end of your interest-only mortgage term and think repayment could be an issue, here are a few options to consider.
*Financial Conduct Authority 2013
Extend your mortgage
This gives you more time to clarify your repayment strategy. Many lenders are reluctant to lend to borrowers beyond a certain age, though, so you may face difficulties. However, there are some lenders who offer mortgages with no upper age limits. At Key Retirement, we have a team of mortgage specialists who are experts in traditional mortgages for older borrowers. Find out more about Key Mortgages here or call 0808 252 9775.
Alternatively, you could switch to a repayment mortgage. This might allow you to access lower interest rates, possibly with the option of overpaying your mortgage. Your monthly payments may rise but this is because you will be paying off your mortgage debt as well as the interest.
Selling your home to move to a smaller property might also allow you to free up some cash. Don’t forget, however, to factor in the costs of moving, both financial and emotional. Stamp duty alone could cost thousands of pounds.
This allows you to stay in your home while releasing some of the equity and paying off your existing mortgage. If you’re considering equity release, please read 'Is equity release right for you?
' You should also consider the fact that equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. The most popular type of equity release, a lifetime mortgage, is a loan secured against you home.
Does this affect you?
1 Contact your mortgage lender.
2 Consider your options.
3 If equity release could be the solution, speak to Key Retirement.