Pay off Interest Only Mortgage.
Despite what you might have read or heard, there are still interest only Mortgages available. There are a few scenarios where an Interest Only mortgage might be suitable. To find out if an interest only loan is the correct option for you, it is vital that you get professional advice.
Currently in the UK and in Scotland there are hundreds of thousands of people with an interest only Mortgage, with no real means of repaying the Mortgage at the end of the term.
If you have no means of repaying your interest only mortgage at the end of the term, what are your options?
The first thing you must do speak to your existing lender, they may consider extending your mortgage term, however there is no guarantee that they will agree to do this.
Another option to consider is selling up and downsizing, however many people do not wish to do this, as they have probably lived in their home for many years. The thought of moving does not really appeal and they probably do not want to move away.
One other option to consider as a possibility is an Equity Release mortgage. Equity release is of course not for everyone however in some cases it may be a solution, but will depend on individual circumstances. Equity release is a market that is growing year on year, but as I said it is not suitable for everyone and you should seek advice before deciding if this is an option for you.
There is no doubt however that people with interest only mortgages are going to require some sort of solution in the future. It is something that governments can no longer simply ignore and lenders need to bring out products and solutions to help people in this situation.
There is no point blaming people who have not made adequate provision for repaying their interest only mortgage. Let’s not forget the endowment scandal, where many people were told that their endowment policy would not only repay their mortgage but give them a lump sum as well! Is it really fair to penalise people who were mis-sold endowment policies? Leading them through no fault of their own to have no means to repay their mortgage debt? I don’t think so and I think lenders have a responsibility to look at solutions to help these borrowers. They could either extend their mortgage term or look at Equity Release However providers need to bring out mortgages that are more suitable and have more options for a wider demographic.
Currently Equity Release mortgages could offer a solution, however they have many restrictions based on age which can restrict the amount a person can release. Therefore in many cases Equity Release may not be suitable as a way of repaying an existing interest only mortgage. This is where lenders need to come out with products such as lifetime mortgages that have higher loan to values and are more flexible based on client’s circumstances.
Since the introduction of MMR, there are many lenders now, who have a final age at which they will expect repayment of the mortgage debt. In the past lenders such as the Halifax had “the retirement home plan, which allowed borrowers to pay interest only for the lifetime of their mortgage. Now while this may not prove an ideal solution for everyone, in my opinion it was a product that met a definite need in the market.
From what I can see the demand for such a product is there are now, however it is up to the lenders to look at lifetime interest only mortgages as a potential solution for many clients. It would certainly be a step forward in the right direction.
Unfortunately the endowment mis-selling scandal, the introduction of more stringent rules on interest only mortgages after MMR( Mortgage Market Review) has meant many people have been left out in the cold.
With no other means to pay off their interest only mortgage other than selling their existing property or considering an equity release mortgage, borrowers options are limited.
Hopefully going forward, lenders will look at the problems of existing interest only mortgage borrowers and offer products that will allow the borrowers to remain in their home.
If you need advice on interest only mortgages, whether you have an existing interest only mortgage or if you’re looking to purchase a property using an interest only mortgage, then give us a call on the number above. At Mortgage Advisor Glasgow we have professional advisers available to help you whether you need advice on an interest only mortgage or equity release.
Call us know on 01412801992 or use the contact us now or quote request forms on the website.
Michael Markey
EQUITY RELEASE SCHEMES WILL REDUCE THE VALUE OF YOUR ESTATE AND MAY AFFECT YOUR ENTITLEMENT TO STATE BENEFITS.
TO UNDERSTAND THE FEATURES AND RISKS ASK FOR A PERSONALISED ILLUSTRATION