Do you have an interest-only mortgage on your home? The answer could very well be yes, as nearly one in five mortgage customers currently have an interest-only home loan, according to the Financial Conduct Authority (FCA). Interest-only deals allow borrowers to pay off the capital only when the mortgage term ends, and while you will pay smaller amounts monthly, you will need to make plans to repay the capital (the amount you borrowed) in order to clear your debt.
In 2013 the Financial Conduct Authority (FCA) identified three interest-only mortgage maturity peaks on the horizon (source). The first peak, happening now, is likely to have more modest shortfalls due to many of these home owners having higher levels of equity. But the next two peaks in 2027/2028 and 2032 include potentially less affluent people.
If your interest only mortgage is reaching maturity soon, there are a few things you should potentially look into to make sure you are in a good position.
Check your current mortgage arrangements
Look at your latest mortgage statement for how much you owe and when the amount is due to repay. If your plan is to sell your home and buy a smaller one at the end of your mortgage, check the value of your property is enough to cover for this.
Speak to Us
You might think there is not much you can do, you might be unsure or unable to change your current plans, but it is still well worth speaking to our team as we can help you understand possible options or changes you might need to make in the future.
Consider your Options
Together we will weigh your best options: you could potentially increase your monthly payments to cover some of the capital you borrowed as well. If that is not an option, we can look into finding a more affordable deal, such as an interest rate change. We can also look into making your mortgage term longer, as well as paying off some of the money you owe during the mortgage term and switching to a repayment mortgage to repay the capital by the end of the term
If you are unsure of how to change your plans at the moment, speak to our friendly Mortgage Hub team and we will help you understand the options you may have.
The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first time buyer mortgage, or are looking to re-mortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.