If you are on an interest only mortgage do not delay making plans to eventually clear your debt
On an interest only plan you will pay less to your lender each month. This sounds great in theory, however in practice it means that you are not paying off any of the capital sum of your loan. Once you come to the end of your mortgage, the initial borrowing will still need to be paid off in a lump sum. If you haven’t planned in advance then you will likely lose your home, either through being forced to sell or the bank will repossess it.
The Council of Mortgage Lenders estimates that around a fifth of mortgage holders in the UK are on interest only plans, some 1.9 million borrowers. Financial regulators have clamped down on who has access to these types of mortgages, but this does nothing to help those who have already entered into these deals.
If you are currently on an interest only plan you need to act now while there may still be time. It is your responsibility to pay off the loan so the earlier you speak to your lender or mortgage adviser the more time you will have to make a difference. You need to assess how much you owe and when it is due to be repaid. Once you have clarity on this issue then you can work out whether you are likely to be able to repay it in full. You may be planning on downsizing at the end of the term, but check to make sure you will have enough money to do so. You may be able to switch your mortgage to a capital and interest repayment plan or even change the length of the term. It’s crucial to speak to your lender or mortgage adviser to see if this is an option.
Once you have discussed with your lender or mortgage adviser and you have come up with a plan, it may involve a remortgage. If so you will require our expert guidance in relation to dealing with the legal formalities.
If you are on an interest only mortgage and would like advice in relation to any issues regarding remortgaging your property please give us a call on 02891 817715 or contact our property team by email at email@example.com.