Over 39,000 interest-only mortgages are due to end in 2020. If you have an interest-only mortgage, the length of the mortgage term you would have only been paying off the interest and not the capital, unless you have been making overpayments. Some borrowers may struggle to pay the balance at the end of the term or may not know what their options are.
Could remortgaging be the answer?
The purpose of remortgaging a property is to cut down the interest rate on your mortgage, which can free up some money you could then put towards paying off the capital part of the loan. If you’re using the lender’s Standard Variable Rate, then you may be paying over the odds as they are usually higher than the interest in your initial deal period.
Right now, there are historically low rates available so it could be worth checking if you could get a better mortgage deal and save some money. You could also be able to change to a repayment mortgage, so you can pay off both the interest and the capital. Something to think about is that lenders will take your age into consideration when looking at affordability criteria, which can make it more difficult to secure a deal as it could make monthly payments very high.
Another option that may be a good option for you is a retirement interest-only (RIO) deal. These mortgages are very similar to a standard interest-only mortgage, with two main differences:
They have no end date to the loan, it’s only paid off when you die, move into long term care or sell the house.
Affordability is based on the income of the lowest earner.
Retirement interest-only mortgages are usually aimed at borrowers of a certain age who may find them easier to qualify for than a standard interest-only mortgage.