Help and support

Mr and Mrs Allen have three children who will be moving out in the next few years. They have an interest only mortgage with a balance of £192,000 to repay at the end of their 14-year term but have no repayment plan in place to deal with this.

The Allens plan to remain in the family home for the rest of their lives so have started thinking about what they need to do to prepare themselves for their mortgage term-end.

The Allens contacted an independent mortgage broker, who reviewed their income and expenditure and they found they could afford to switch part of their mortgage to a repayment basis, with the rest of their loan remaining on interest only. This is known as a part & part mortgage.

Two years later, the Allens had paid off other non-mortgage debts so spoke to their broker again as they now had more disposable income.  Following this appointment, they found they were able to convert the remaining amount to a repayment mortgage which will fully repay the mortgage at the end of the term, provided they keep up with their monthly payments.

During the process, the Allens were very clear with their mortgage broker about what they could afford to spend, so made amends to the repayments when they could.

Mr Porter had five years left until the end of his interest only mortgage term. He planned to use investments to repay the balance at term end. He reviewed the investments recently and realised the return he expects is unlikely to cover the full outstanding balance at the end of the mortgage term. As such, he risks being left with a payment shortfall.

Mr Porter used our online overpayment calculator and read through his options. He determined that he could afford to make regular monthly overpayments during the remaining term that would reduce his balance over time and cover his expected payment shortfall.

Mrs Leonard originally planned to convert her interest only mortgage to a repayment (capital and interest) basis to repay the amount she borrowed over the remaining term. However, following several increases in interest rates and other cost of living challenges, her finances became stretched, and she would have been unable to afford the higher monthly payments. Because of this, she didn’t complete the switch to a repayment mortgage and was therefore worried about her ability to repay her mortgage in full at term end.

Mrs Leonard lives in an area that was hit hard by falling house prices and found herself in negative equity, meaning her house is currently worth less than the amount she borrowed on her mortgage. This would make it very hard for her to currently remortgage elsewhere.

After speaking to one of our team, who recommended contacting an independent mortgage broker, Mrs Leonard found that by making small overpayments as and when she is able, she can gradually reduce her mortgage balance.

Depending on house prices and based on the overpayments Mrs Leonard can currently afford to make, she is steadily reducing her capital balance and expects to be out of negative equity within four years.

Her eventual plan is to remortgage with a new lender at a lower interest rate and convert the mortgage to repayment, possibly over a longer-term.

Mr and Mrs Hussain were 79 and 76 years of age and in the final 12 months of their interest only mortgage term. Over the years they had modified their home to cater to their evolving needs and did not want to move to another property.

They had used savings and investments to pay down the mortgage balance when they were able but were still going to be left with a £35,000 shortfall at term end, that they were unable to pay.

The Hussains had benefited from rising house prices over their time living in the property and because of their overpayments, they had a Loan to Value (which is the amount they owed compared to how much their property is worth) of only 19%.

The Hussains spoke to an independent mortgage broker to consider their options. The broker recommended an equity release mortgage that allowed the Hussains to fully pay off the outstanding balance and to remain in their property for the rest of their lives.

Mr Blake suffered a temporary loss of income for three months while between jobs and fell behind with his payments on his interest only mortgage.

After returning to work he completed an income and expenditure assessment with one of our colleagues and agreed on a temporary payment plan to clear the arrears in instalments over six months.

After paying off his arrears, Mr Blake decided to make regular monthly overpayments to help reduce his balance. To formalise this, he called and asked us to collect the overpayments by Direct Debit. As a result, he now pays off a chunk of his capital balance each month.

Mr Blake eventually plans to sell at the end of the mortgage and use the remaining funds as a deposit on a new home. By reducing the amount he owes through regular overpayments, he is increasing the size of his future deposit and also reducing the amount of interest he will pay over the remaining term.

MoneyHelper is a government backed body that offers free, independent and impartial guidance to help you make the most of your money.

You can find a wide range of information about interest only mortgages by visiting the MoneyHelper website.

If you need further support, you can call their advisers of use the live chat service on their website.

Citizens Advice offer free, confidential and impartial advice on legal, money and other problems. They offer confidential advice online, over the phone, and in person through their local advice centres.

For online information or to find your local advice centre, visit their website.

You may wish to seek independent advice about your options from an independent mortgage broker.

Please be aware that some brokers charge an advice fee for their services, so you may want to confirm this with them.

If you don’t have your own broker, you can visit the independent Unbiased website. You can use their website to find a broker who will then contact you to arrange an initial free, no-obligation discussion.

Once you’ve found a broker, we’d recommend you verify their details on the Financial Conduct Authority’s Financial Services Register.

To read more about remortgaging, please see the MoneyHelper website for further information. MoneyHelper is a government backed body that offers free, independent and impartial guidance.