What To Do If Your Interest Only Mortgage is Ending
If your interest only mortgage is coming to the end of its term and you have the loan balance to pay, you have a few options available, but the time to act is now so don’t delay. At the time of writing, inflation and interest rates have risen dramatically. Some mortgages could be more expensive, so you will need to look carefully at your options and plan wisely. If you’re not looking to sell your home or downsize, there are ways you can repay the loan balance.
Can I extend my mortgage term?
You may be able to ask your provider if you can extend the mortgage term. Depending on your circumstances and the lender, they might be happy to do this. You will need to convince your mortgage provider that you have the ability to repay your mortgage over a longer term.
Income is a key factor that will be considered. If you cannot prove that you have enough income to repay your mortgage debt, then you may fail to convince your lender to lengthen the term. If you’re semi-retired or about to retire, your pension income will be taken into consideration, along with other sources of income that can be used to repay the balance.
If you’re over 75, you may struggle to find a provider who is willing to extend the mortgage term, and many lenders have an upper age limit cap of 85. But if you can prove you are able to make the repayments, certain providers might be happy to extend your mortgage term.
Can I remortgage with a new lender?
Remortgaging is an option to those who are unable to pay off their mortgage balance and whose lenders will not extend the mortgage term. As this process involves a brand-new mortgage deal, you will have to pass the provider’s eligibility and affordability checks.
If you’re self-employed with varying sources of income, you may need a specialist lender to provide you with a suitable mortgage. If you have bad credit, you might also need a specialist mortgage provider due to the perceived risk factor of lending you a deal. If you fall into these two areas, talk to our team who will be able to give you expert advice.
If you’re semi or fully retired, you may be able to prove to your lender that you have the ability to repay the mortgage in other ways. Known as a “repayment vehicle”, this could include being able to draw from pension income or use money saved in ISAs, investments, bonds, unit trusts or endowment policies. If you have an additional property you could sell, this might also prove to the lender you have sufficient funds available to repay a mortgage.
Can I release equity from my property?
Depending on the amount of equity you have in your property, one option available to those aged 55 or over could be to switch to a Lifetime Mortgage. This is a type of long-term loan that only gets repaid once your home is sold after you pass away or if you were to go into long-term care. So, you won’t have to make any mortgage payments while you’re alive.
Check to see how much positive equity you have in your property. If your home is worth more than you originally paid for it, you might be able to pay off the mortgage balance through equity release alone.
Releasing equity from your property could provide you with a way to continue living in your home, removing the hassle of having to move house. So, you can enjoy your retirement years worry free. Before you decide to sell your home or change your mortgage deal, always get professional advice from an independent, whole-of-market mortgage broker.
Are you an accountant or IFA looking for a way to help your client repay their mortgage balance? If so, please get in touch, as we may have practical solutions to help you support your client. We can answer any questions you may have so you can help your client make an informed decision about their mortgage options.
If your Interest Only Mortgage is coming to the end of its term and you need advice, then talk to our friendly team. Call 01455 238 650 or send us an enquiry.