Interest-only mortgage - shortfall worry.

Pianoman_2

I have an interest-only mortgage that ends in 6 years but have no provision for the £55k owing on the capital. I'm self-employed, 56, and my property is worth about 150k. What are my chances of extending the term of the mortgage, or remortgaging with another company? I don't earn a fortune btw, just enough to get by each month. My father, from whom I learnt my trade, worked until he was 85 so I hope I have a good few years left in me yet!

Any suggestions/advice what i should do will be gratefully received.

michael1983l

Pianoman wrote: »

I have an interest-only mortgage that ends in 6 years but have no provision for the £55k owing on the capital. I'm self-employed, 56, and my property is worth about 150k. What are my chances of extending the term of the mortgage, or remortgaging with another company? I don't earn a fortune btw, just enough to get by each month. My father, from whom I learnt my trade, worked until he was 85 so I hope I have a good few years left in me yet!

Any suggestions/advice what i should do will be gratefully received.

Mortgage lenders will be reluctant to go past your official retirement age. Either way if you extend now you will still need to find the capital when your 65 if you carry on paying interest only. I would recommend a capital repayment if you can afford it, and as you have so much equity in the property you will have no problems finding a good mortgage deal. Speak to an independant financial advisor they will be able to help you much better than me.

opinions4u

Pianoman wrote: »

I have an interest-only mortgage that ends in 6 years but have no provision for the £55k owing on the capital.

Message for others (especially with longer than 6 years): The sooner you do something about this sort of problem, the better.

I'm self-employed, 56, and my property is worth about 150k.

One option will be to move to a house worth £90k or less.

What are my chances of extending the term of the mortgage

You aren't really giving your lender much choice. Turn the question round. What are you going to do to get the debt down?

or remortgaging with another company?

It's an option, but they will most likely take in to account that your income may drop at some undefined retirement point in the future.

I don't earn a fortune btw, just enough to get by each month.

So you can't really afford the mortgage you have, as you will never be able to repay it in that case.

My father, from whom I learnt my trade, worked until he was 85 so I hope I have a good few years left in me yet!

Good for him. But you're not your Dad. Many of those who work beyond 70 tend to reduce their hours anyway, which reduces their income earning (and debt repaying) capacity.

Talk to a mortgage broker about the situation you are in. Be prepared to pay significantly more every month.

Your decision to take an interest only mortgage was flawed.

michael1983l

I think thats unfair o4u, it is far better paying interest only into a property you own than a private rental agreement that you leave with nothing.

As you mentioned there is always the possibility to move to a lower priced house, or alternativly take advantage of the low interest rates and renegotiate the mortgage to repayment and keep the cost close to what they are already paying now.

When people ask questions, if you don't want to answer it constructivly whats the point in being rude about it?

opinions4u

michael1983l wrote: »

I think thats unfair o4u, it is far better paying interest only into a property you own than a private rental agreement that you leave with nothing.

A lender refusing to extend the term on an interest only mortgage could, potentially, move for repossession. Unlikely it would happen while the debt can be maintained, but doesn't leave the OP with much.

By the way, over the last year or so somebody owning would have paid interest and still seen their house value drop 15%+. Somebody renting would only have paid rent. Which was the better deal?

As you mentioned there is always the possibility to move to a lower priced house, or alternativly take advantage of the low interest rates and renegotiate the mortgage to repayment and keep the cost close to what they are already paying now.

So why say my suggestions aren't constructive?

When people ask questions, if you don't want to answer it constructivly whats the point in being rude about it?

Please highlight where I was rude. I answered point by point, made suggestions, and commented (for a wider audience too) that interest only mortgages without a plan to repay the capital are a flawed concept.

snarffie

opinions4u wrote: »

Please highlight where I was rude. I answered point by point, made suggestions, and commented (for a wider audience too) that interest only mortgages without a plan to repay the capital are a flawed concept.

Your tone did come over a little bit harsh

Mind you, it's a serious situation to have no plan to pay off the capital on a mortgage, and your suggestions are pretty much bang on. The OP could actually try to sell up NOW as you suggest. The OP could sit in rented accommodation for a year and buy back in at a lower cost.

Unfortunately, this is gambling on the market and I suspect the OP has lived there for some time and may not want to sell.

My advice is to get some advice from (more than one) mortgage adviser, with a view to paying off that capital at some point otherwise you will never be rid of this problem. Better face up to it at the age of 56 than when your 65, so good luck.

maninthestreet

michael1983l wrote: »

I think thats unfair o4u, it is far better paying interest only into a property you own than a private rental agreement that you leave with nothing.

By taking an interrest-only mortgage, you are no better off than if you had been renting the house - at the end of the mortage term, you will not own even a small percentage of the house, just the same as if you were renting it for the same period.

michael1983l

maninthestreet wrote: »

By taking an interrest-only mortgage, you are no better off than if you had been renting the house - at the end of the mortage term, you will not own even a small percentage of the house, just the same as if you were renting it for the same period.

Thats irrelevant, he owns two thirds of the property already. He is doing nothing wrong by doing what he is doing if he cannot afford a repayment mortgage. Obviously as long as he understands that this cannot go on forever. Worst case scenario he is forced to sell up banking 95k.

Robert_Sterling_3

michael1983l wrote: »

I think thats unfair o4u, i

I think that you are unfair to o4u.
o4u is giving an opinion. No more No less.

dimbo61

pianoman is 56 now and the normal retirement age for men ( at the moment ! ) is 65.
He has a few years to start reducing the debt
You need to pay some of the capital off the mortgage each month to reduce your debt.
If you start with say £300/400 a month you will soon see your IO mortgage go down and the interest you pay each month will be reduced and you can then overpay even more.
Take action now or you will be forced into selling your home when you retire.
Take a long hard look at what you spend your income on and how to save!
Look on the debt free boards and check out all Martins saving tips.
Have you got savings earning poor interest right now, cancel the sky,trips to the pub/takeaway and make sure your buisness pays you a good income or change career. GOOD LUCK

Robert_Sterling_3

snarffie wrote: »

Your tone did come over a little bit harsh

Mind you, it's a serious situation to have no plan to pay off the capital on a mortgage.

It was not o4u's tone that was harsh it is the truth of the situation which is harsh.