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Interest Only Mortgage – How Advice Can Help

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INTEREST-ONLY MORTGAGE – HOW ADVICE CAN HELP

Interest Only Mortgages

Interest only mortgage holders only pay the interest on the loan each month and don’t repay any of the capital.

This type of mortgage has often hit the news headlines, as some mortgage borrowers took on this type of cheaper mortgage before the stricter rules on mortgage eligibility came into force, and didn’t always have the right plans in place to ensure they could repay the capital amount when it became due at the end of the mortgage term. The Financial Conduct Authority estimate that around 600,000 people have an interest only mortgage that is set to mature by 2020.

So, if you’re facing a possible shortfall in the amount of capital you’ll need to repay your mortgage, then professional advice is essential. There are various ways to approach the problem, including transferring to a different type of mortgage, using a pension lump-sum, or releasing equity. Lenders are increasingly aware that some people with interest-only mortgages are likely to face difficulties in the future, and are developing products to avoid the risk of borrowers defaulting and the need to sell.

Lenders re-entering the market

Several lenders are now re-entering the interest only mortgage market, taking the view that there is nothing wrong with an interest only mortgage as long as the borrower meets all the affordability criteria and has a sound repayment plan in place. Lenders will consider repayment proposals including the sale of assets, the sale of a second home or commercial property and land, pension lump sums, stock and shares or ISA investments. Some will also include downsizing at retirement.

Whatever your need for mortgage finance, getting advice will ensure you get the most appropriate deal for your circumstance.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

Think carefully before securing other debts against your home. Equity released from your home will be secured against it.

 

Information sourced from Intrinsic ‘Essentially Mortgages’ Q3 2018.

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