Do you have an Interest Only mortgage?

There are thousands of people like you on an interest only mortgage. Before the recession began, these types of mortgages were very popular as they monthly costs are lower than that of capital repayment mortgages. By 2007 in the height of the boom, 33% of all mortgages were interest only* and a vast majority had no specific repayment plan.

An interest only mortgage means you are only paying off the interest every month and the full loan amount will need to be paid back at the end of the term. If the value of your house falls or you took out a mortgage in excess of 100% of the property value, the amount you owe could be greater than the value you would receive if you sold the property.

Many lenders now have changed their criteria on interest only mortgages and their acceptable repayment vehicles. These lenders now require a higher equity amount within a property if you have an interest-only mortgage, alongside stringent requirements for particular repayment vehicles to be in place.

If you currently have an interest only mortgage and do not have a repayment vehicle in place you are at risk. It is always advisable to review your current mortgage and ensure it is the right choice for you. By switching to a repayment mortgage you would be paying off the loan as well as the interest, meaning you would not owe anything at the end of the mortgage term and would no longer be at risk.

The monthly payments on a repayment mortgage would however be higher than that of an interest only mortgage so it is important to review your finances to see what you can afford to pay. Another option which would not increase your monthly payments by as much would be a part repayment, part interest only loan. This type of mortgage means you would be paying off some of the capital and would therefore owe less at the end of the mortgage term.

Existing interest-only borrowers will also need to think about the impact of the criteria changes will have on them and their future. There may be limited options available when re-mortgaging or moving house, so it is always best to get advice now to avoid being unable to move forward with your plans in the future.

Thankfully here at Harvey Bowes, the team can offer a full mortgage advice service and can look at all the options available to you and discuss the best solutions for you. There are many things to take into consideration when taking out a mortgage such as general insurance and protection; thankfully we all offer a full service in insurance so why not contact us today? Call 029 2115 6918.

*Figures from the Council of Mortgage Lenders

Your home may be repossessed if you do not keep up repayments on your mortgages.

About harveybowes
Mortgage Broker and founding Director of Harvey Bowes Limited. A mortgage broking practice with bases in Cardiff & Poole, UK. We take a fresh and positive approach to mortgage broking which pays dividends for both our clients and frankly, ourselves. The team at Harvey Bowes are expert advisors in all aspects of mortgages from residential to commercial and buy to let.

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