October 24, 2024
If you’re reaching the end of an interest-only mortgage and need advice about repaying the original loan capital, Graham Lee’s words of wisdom may be able to set you on the right track.
End-of-term Mortgages
25 to 30 years ago, interest-only mortgages had a bit of a ‘moment’, with many people choosing this as an option. Unfortunately, there was also widespread mis-selling of endowments, with many people seeing only the immediate benefit of lower monthly repayments, and lacking understanding of the long-term impact of only paying off the interest on their mortgages.
Today, Graham says he’s seeing an increase in enquiries from new clients who are worried about their mortgages reaching the end of term, and what to do now that they have to pay off the capital.
Graham says, “In the worst-case scenarios, I’ve been contacted by people who have ignored their predicament and are now threatened with eviction as their mortgage lender wants their money back. If this sounds like a situation that you might be facing, the first piece of advice I can give you is not to panic. I can help, but the earlier you contact me, the more options you’re likely to have.”
Many people in this situation are approaching later life, perhaps with retirement plans on the horizon, and Graham is a member of the Society of Later Life Advisers (SOLLA) panel for later-life lending. This means that he understands the particular needs and priorities of people in or approaching retirement years, and can offer advice tailored to your specific needs.
What are the options for repaying the capital at the end of an interest-only mortgage?
If you need to find a way to repay the capital on your property, Graham will look at your specific circumstances, find out what can and can’t be done, and recommend the options available to you.
One option may be that your property could be eligible for an equity release loan – and Graham has access to reputable lenders (including many that you won’t find on the high street) who offer this type of mortgage. There are also other options, and as a SOLLA member, Graham often has access to a wider range of products for the over-50s on all levels of income.
Or you may be able to access a lump sum from your pension funds.
Even if these options aren’t available to you, and you have to sell your property, Graham knows how to help.
Graham says, “Not every property is eligible for equity release. Certain types of construction may make it unappealing to some equity release lenders, for example. I recently had a client who turned out to have more than one mortgage on their property. There was a short timeframe for paying off the interest-only mortgage, but, by accessing a pension fund and taking out tax-free allowances we were able to achieve it.”
Most lenders start to remind people reaching the end of their mortgage term between five and two years from the end-of-term. The problems begin when people don’t know what to do about it, and therefore choose to do nothing. But even if you’ve reached the point where your lender is threatening legal action and eviction, Graham can often intervene and buy you time to sell the property – potentially giving you the opportunity to downsize your property using the equity, whilst still paying off the original mortgage.
Alternatively, depending on your circumstances, you may be able to convert all or part of your original loan to a repayment mortgage for a few years, reducing the amount of capital that you owe at the end.
How can an IFA help if my mortgage lender is taking me to court?
Graham says, “A lot of people don’t realise that an IFA is not just there to help you apply for a mortgage, set up a pension fund or help you with estate planning. We can also help you when things have gone wrong.”
Graham has supported several clients recently whose lenders have gone as far as to take them to court to obtain a County Court Judgement (CCJ). He recognises that part of the problem is that many people simply aren’t familiar with the process, or the paperwork.
He adds, “the paperwork isn’t always very clear. I’ve had people come to me with eviction notices, not fully understanding what is happening. In some cases, I’ve been able to halt the process long enough to give them time to sort out an alternative course of action.
“Whatever stage things have got to, I can talk you through the process so you fully understand the situation and what is likely to happen next. I’m absolutely not here to judge you for how you’ve got to this position. What I am here for is to find ways to increase your options.”
If you’re concerned about your interest-only mortgage nearing the end of its term, and would like to speak to an IFA about your options, remember, the sooner you talk to them, the more options you are likely to have.
Contact Graham Lee – Talis IFA
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