The current interest only mortgage situation
We have had many clients tell us about being sold interest only mortgages around 10 years ago. Some were sold a 10-15 year product by a broker and were not advised properly about the endowment side of the mortgage. 10 years later banks want their money back and clients can’t afford to pay them. Having paid only the interest for the last 10 years, they are now finding out that they are in debt. They are facing the prospect of their homes being repossessed and they are under the threat of being evicted.
A study of Citizens Advice highlighted that there were over 1.5 million interest only mortgages without any record of a linked endowment or any other repayment method. Almost 1 million of these mortgage holders have no repayment plan. Most people who took these interest only mortgages have mentioned that they have not even thought about how they will repay the mortgage once it comes to an end.
According to recent research borrowers may be facing an average expected shortfall of £71,000.
Soon a large number of these interest only mortgages will end. From 2017-2021 about 425,000 interest only mortgages will end. This number will reach nearly 190,000 a year by the year 2030.
What is an interest only mortgage?
An interest only mortgage is one that requires the borrower to pay off only the interest and not the capital, however at the end of the mortgage term only the interest will be paid off and the original debt will still need to be paid.
What is an Endowment Policy?
An endowment policy on an interest only mortgage is a life insurance contract that will pay out a lump sum after a specific period of time. The borrower on taking out an interest only mortgage should also be sold an endowment policy which they will have to pay into. The pay out from the matured endowment policy is meant to pay off the outstanding debt of the property.
How can FastBuy Properties help?
FastBuy Properties offers a solution by offering to buy your property for guaranteed fast cash. We perform an honest valuation of your property and once an offer is agreed upon we will set the completion date for the sale. You will receive the money for your property within 7 days of the completion date, making it possible for you to pay off your interest only mortgage quickly.
If you would like more information on debt and mortgage advice visit the citizens advice website