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My Interest-Only Term is Ending Soon – What Should I Do?

I'm near the end of my interest-only mortgage, what happens now? First, you should talk to one of our expert advisors for the right advice.

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 11th November 2019 *

Once you reach the end of your interest-only mortgage, you will need to repay the loan amount in full. There are many ways you could do this and to assist you in making the right decision we’ve put together this article which outlines what you should do next. 

The following topics are covered below:

Once you’ve read through the details below if you have questions about your interest-only mortgage you can talk to one of the advisors we work with. They will be happy to answer your questions and help you decide your best move.  

All the experts we work with are experienced whole-of-market mortgage brokers with access to lenders across the UK. Call 0808 189 2301 or make an enquiry for a free, no-obligation chat.


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What happens when my interest-only mortgage ends and I don't have enough capital to repay the loan?

The usual options available to you once your original mortgage term comes to a close would be:

Ask your current lender to extend the term

You can ask your existing lender if it is possible to extend your mortgage to give you more time to find the money to pay it off.

Some lenders will be happy to extend your mortgage, as long as you can convince them that you’ll be able to repay the debt over a longer period.

However, older borrowers might struggle to convince their mortgage provider to extend the term, because some providers won’t lend to anyone over 75.

With other lenders, the age limit is 85 and a handful will impose no upper age cap as long as they are convinced you can handle the payments post-retirement.

Those who don’t have adequate income might also struggle to convince their lender to lengthen the mortgage term.

Remortgage to a new lender

If your mortgage provider won’t agree to a term extension, there’s always the option to find another lender. When remortgaging to a new lender, you’re basically applying from scratch, so you’ll have to pass their affordability and eligibility checks.

You may require a specialist lender if any of the below applies to you…

You have non-standard income: A guaranteed salary is the most attractive to lenders, so self-employed borrowers and those who supplement their income with benefits and freelance work on the side should seek specialist advice to ensure they end up with the best remortgage deal. 

There’s bad credit on your file: Borrowers with certain types of bad credit may also have to find a specialist broker to ensure they find the right remortgage lender. Certain mortgage providers consider some forms of adverse credit (such as repossessions and bankruptcies) too high risk and others will offer you a less favourable deal if you have any credit issues at all. However, bad credit mortgage specialists may base their lending decision on the age of the credit issues and take into account its severity. 

You’re over 75: As previously mentioned, some mortgage lenders won’t deal with customers over 75. Some are happy to lend to customers over 85 and a minority will cater for customers even older, as long as they’re confident they will be able to meet the mortgage repayments in retirement.

You have no repayment vehicle: In order to find an interest-only remortgage deal elsewhere, you’ll still need to prove to the new lender that you have a repayment vehicle in place.

Acceptable repayment vehicles include…

  • Endowment policies
  • Stocks and shares
  • ISAs
  • Unit trusts
  • Investment bonds
  • Pensions
  • The sale of another property

We cover repayment vehicles in more depth in the section below. If any of the points raised here relate to your own personal situation - don’t panic! Give us a call on 0808 189 2301 or make an enquiry and we can arrange for an advisor we work with to get in touch to offer assistance.

What are the exit strategies available?

The good news is that you have a number of options when your interest-only mortgage ends:

  • Sale of property (downsize).
  • Sale of another property.
  • Pension/savings/other investments.
  • Remortgage to a retirement mortgage.
  • Switch to repayment.
  • Release equity.

Downsizing

Perhaps the most extreme solution is the sale of your home to pay off the outstanding amount. This option comes with difficulties though, and these may start with any problem you have while trying to sell the property at the price you need. It also raises the obvious question of where you’re going to live afterwards – are you going to downsize?

In which case, is the difference between the value of the two homes enough to pay off the mortgage?

Sell another property

If you’re in the enviable position of having another property that you can sell to pay off the mortgage then that might be a good way forward, providing you were not relying on that investment to provide your pension.

Use your pension or savings

If you have enough savings, an ISA or a pension lump sum then these are examples of ways you can pay, but some investments have performed poorly in recent years and won’t reach anywhere near the sum required.

Remortgage to a retirement mortgage (if borrowing into retirement)

You may be able to switch your mortgage to another lender that offers a ‘later life’ loan such as a lifetime or retirement mortgage.

A lifetime mortgage is the most popular type of equity release mortgage in the UK. They are aimed at over-55s and involve the borrower securing a loan against their property.

They continue to own the home and make no payments during their lifetime as the loan and interest are paid off through the sale of the property at the end of the term, usually when the borrower dies or enters long-term care.

This allows you to take out a cash lump sum from your home to enjoy during your retirement years, but releasing equity from a property should never be done lightly, so be sure to speak with a specialist advisor before pressing ahead.

Call 0808 189 2301 or get in touch for a free, no obligation chat. We’ll connect you with one of the experts we work with, ensuring that they have experience of helping people in similar situations.

Switching to a repayment mortgage

In some cases, it may be possible to change the mortgage to a repayment loan, although the monthly amounts payable will rise significantly.

Your current lender may allow this so you can pay off the outstanding debt plus interest over the newly-agreed term - but you should consult a whole-of-market broker before locking yourself into a deal, as there may be a superior offer available elsewhere.

Releasing equity may be an option

If your property is worth more than you paid for it, and you’re in the fortunate position of having positive equity, you may be able to release this equity to pay off the mortgage.

You can work out whether you have equity by subtracting the total amount you owe on all loans secured against the property from its appraised value.

The specialist advisors we work with can help you determine whether releasing equity is a viable option for repaying your interest-only mortgage.

Call 0808 189 2301 or make an enquiry for a free, no-obligation chat.

What happens if your property is in negative equity?

Negative equity is a problem experienced by many homeowners, especially in parts of the country where the market slumped during the financial crisis.

People were left with mortgages to pay off that were higher than the value of their home. Again, the advisors we work with can assist you if you are in this category.

How old can you be and still get a mortgage/remortgage?

How old you are when you apply for a mortgage does become a major factor if you are close to retirement age or older.

But it’s now easier to find a mortgage because several specialist lenders have come onto the market in recent years.

Some providers won’t offer a mortgage to anyone over the age of 75, but others are more flexible and will go up to 85, and there are even lenders who have no upper age limit, as long as they’re convinced you’ll be able to repay your mortgage in your retirement years.

The expert advisors we work with know which lenders are happy to accept older borrowers and can help you with the whole application process.

Call 0808 189 2301 or make an enquiry, the service we offer is free, there’s no obligation and we won’t leave a mark on your credit rating.

Will the condition or construction type of property have a bearing?

Yes, the condition and type of construction can have a bearing on whether you can remortgage later in life. In the same way these factors can be important in any mortgage application, and the lender’s attitude towards properties which are in a poor condition or have non-standard construction (e.g. a thatched roof, timber frame etc), is very important.

It may result in a lender asking for a larger deposit, or not offering the most competitive rates.

Are there specialist lenders who can help?

If your interest-only mortgage is ending, whether you’re a straightforward applicant or a complex borrower with negative equity and a non-standard construction property, there are specialist lenders who can help.

We work with whole-of-market advisors who can find the right lender for you, based on your personal circumstances, so make an enquiry to speak with them today.

Speak to an interest-only mortgage expert

If you have an interest-only mortgage and you’re concerned that your existing repayment vehicle may not cover the amount of your loan once it comes to an end, the best thing to do is to take action right away by listening to the advice of an expert. 

The advisors we work with will be able to help you find an appropriate solution which suits your personal circumstances. To get started give us a call on 0808 189 2301 or make an enquiry.

Updated: 11th November 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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