Interest-Only Mortgage Advice in Leeds

What are my mortgage options in Leeds?

As a mortgage broker in Leeds, we see many Interest-Only Mortgages come to the end of their term. In quite a few of these situations, people have struggled to pay their mortgages in full.

Our job is to help you through these kinds of situations and give you advice on what you can do if you are faced with these problems.

Here is everything about interest-only mortgages and what you can do if you’re struggling to pay off your mortgage.

What is an Interest-Only Mortgage?

We’ll rarely find someone who has taken out an Interest-Only Mortgage on a property that they’re living in. Usually, it’s only landlords that take out Interest-Only Mortgages these days. Landlords do this so that they can maximise their profits, Interest-Only Mortgages can help them do this.

During the 1980s and ’90s, these mortgages were very popular, even amongst buyers who wanted to live inside the property that they were buying. Their idea was that they would pay interest on the capital owed and then pay the lump sum back at the end of the term.

At the time of these borrowers taking out an interest-only mortgage, it’s likely that they also set up an investment vehicle, this is usually a low-cost Endowment policy. This policy provided life cover to pay off the mortgage should the borrower die.

Sometimes, people were advised wrongly and weren’t made aware of the risks involved with an Interest-Only Mortgage.

There was no guarantee that the investment would mature for a big enough sum to repay the mortgage. This led to a surge of complaints, and thousands of people received compensation if they got mis-sold.

Why have people still got Interest-Only Mortgages?

Endowment Mortgages are more of a thing of the past. It’s been a very long time since they were popular. You’ll still find people with them though.

It may be that they just haven’t got around to switching to a repayment mortgage. If you end up in this position, it can be a very worrying time because you might be worried about losing your home.

You can still take out Interest-Only Mortgages, however, you will have to pass a lot more requirements to get one. Lenders are much stricter nowadays and matching their criteria may be tricky.

If you take one out now, you may encounter problems in the future.

What can I do about my Interest-Only Mortgage?

A borrower could be taken by surprise by their lender requesting full repayment of the balance. This may happen if there’s been a lack of communication between the applicant and the lender. Lenders should be regularly writing to their Interest-Only customers to ensure that they know they must make plans to repay the capital.

If you have no means to repay the capital, our advice is to keep the lines of communication fully open with your lender. They will be very experienced in dealing with these situations, and you just need to let them know where you stand. Lenders never want to repossess your property, although, they will do this as a last resort.

Here are some of the things you could be doing to resolve the situation:

  • See if your lender will switch you to a Repayment Mortgage if this is affordable.
  • Consider selling up and downsizing if this is achievable.
  • Use your savings/assistance from family members. Sometimes parents will “fast-forward” a future inheritance if they can do so.
  • Speak to a Mortgage Advisor in Leeds and see if you can remortgage in Leeds to a new Lender.
  • Consider equity release in Leeds/Lifetime Mortgage option through a specialist advice firm.

What are my options?

Following on from our last points, there are far more retirement mortgage options open to borrowers now than there has ever been. If you manage to qualify for one of these, you can continue to pay interest to protect the equity you have in the property. Alternatively, if you are not worried about leaving an inheritance to your children, you can let the interest roll-up and cease making payments altogether.

One major problem in getting a mortgage through Equity Release tends to be the loan to value. You must have a decent amount of equity in your home to qualify for one of these products.

Date Last Edited: October 28, 2024