Ways to repay your interest only mortgage

June 15, 2017 by Brendan O'Neill

Home owners

According to statistics, there are over 100,000 interest-only mortgages due to mature in 2017, with more than 1.5 million remaining. Experts have previously expressed concern at how the loans are going to be repaid by consumers at the end of their mortgage term. There are a number of ways that this can be achieved.

If you have a large property, you may be able to consider downsizing to a smaller home. The profit from the sale of your home could be used to pay off the outstanding balance of your mortgage. However, this may not be an option if you are unable to generate sufficient funds to repay the loan.

Extending your mortgage term may also be an option. If you know that you won’t be able to repay the balance by the end of your mortgage term, you could ask for an extension on your mortgage. The outstanding amount will be switched to a repayment mortgage, with the possibility that monthly repayments will be lower, making it an affordable option. If you do switch to a repayment mortgage with a lower rate of interest, you may be able to afford to overpay, reducing the balance much quicker.

Equity release is another option to be considered. However, this is a complex area and advice should be sought from a CeMAP qualified mortgage advisor initially. The most common form of equity release is a lifetime mortgage, which adds interest to the amount borrowed against your home. No repayments are made until either the house is sold, or you die. If you have an interest only mortgage, you may want to seek advice before the end of the term.