Recent research by the Citizens Advice Bureau indicated that almost one million homeowners with interest only mortgages have no plan in place to repay the debt at the end of the mortgage term.
Unless they take action, these people are facing the risk of being forced by the lender to sell their homes when the terms ends, and they may find they do not have enough equity to be able to buy a new home.
With mortgage interest rates at their lowest ever levels, and house prices at record highs, if you have an interest only mortgage but do not have a strategy for repaying it now could be a good time to consider changing to a repayment mortgage. This will give you the peace of mind that the debt will have been repaid at the end of the term, and the monthly payments may not actually be that much higher than the interest only option. This could be particularly true if your mortgage is currently on a lender’s Standard Variable Rate (SVR), which in many cases are significantly higher than the new rates currently being offered.
Even if an interest only mortgage is still the most suitable option for your needs, it may be worth reviewing whether you could save money by moving to a new rate, either with your existing lender or a new one. This could give you the benefit of a lower interest rate, while still having the flexibility to pay off capital when it suited you.
At Provisio we provide totally independent mortgage advice. For a no obligation discussion, please contact Colin Thompson on 01462 687337 or at firstname.lastname@example.org