Interest Only Mortgages

Nearly one in five mortgage-holders has an interest-only mortgage meaning they would need savings or other funds to pay a final lump sum.

Interest-only deals allow borrowers to pay off the amount borrowed only when the mortgage term ends, usually after 25 years, but there is concern that a host of homeowners do not have plans in place to pay the final bill.

The Financial Conduct Authority (FCA) said that lenders had improved their communications with customers at risk since its initial report on the issue five years ago but that many borrowers were ignoring letters from lenders, it found and there were still concerns that some customers may have been incorrectly reassured about their plans by non-specialist staff.

The FCA is very concerned that a significant number of interest-only customers may not be able to repay the capital at the end of the mortgage and be at risk of losing their homes.

The FCA said that 1.67 million full interest-only and part-capital repayment mortgages were still outstanding, representing 17.6% of all mortgages in the UK.

If you have an interest only mortgage and have concerns about paying the lump sum final bill there are various options available to you.

You may be able to extend the mortgage to give you time to raise the money to pay it back or look at re-mortgaging either with the same lender or a different lender.

There is more about this issue here http://www.bbc.co.uk/news/business-42872432

If you choose to re-mortgage you may have an option to change the mortgage to a repayment mortgage which at the end of the term would be fully paid settled.

Choosing to do nothing is risky unless you are confident that you have a plan in place to settle your interest only mortgage when the term ends as it could leave you at risk of losing your home., so it is vital that you take early advice from your lender.

If you do decide to re-mortgage we can help you with the process.

Give one of our conveyancing team a call on 0191 4555361 or email info@hannayslaw.co.uk