There are 3.3m mortgage holders in the UK who have interest only mortgages, and from research recently commissioned by Citizens Advice it would appear that 1.7m of these have no linked repayment vehicle such as an endowment, pension or ISA.
Of these 3,300,000 interest only mortgages, it is predicted that around 40,000 will mature each year between 2017 and 2032, and of these 10,000 per annum are estimated to have either a shortfall or no way of paying the mortgage off.
This is potentially a huge problem for anyone in this situation as their home is at risk of repossession if they don’t have some means to repay these mortgages at the end of the term. Lenders are under no obligation to extend the term of the mortgage and when considering whether they are prepared to do so, will look at it in the same way as someone coming to them for a new loan.
We have recently helped clients at Walker Begley Financial Management with interest only mortgages. These clients had originally intended to use equity in rental property portfolios to repay the debt on their main home, and so thought they had a definite policy in place. For different reasons they find they are not now able to rely on this, and needed plan B, which we managed to find.
If you have an interest only mortgage on your home it is important you make sure you have a definite strategy in place as to how you intend to repay the debt at the end of the term. The earlier this is considered the more options are likely to be available, and so ideally it needs looking at long before the existing mortgage term expires.
If you would like a review of your mortgage please contact Sally on 01925 210000, or email