Getting out of an interest only

quantic

A friend of the family purchased a house with a 100% interest only mortgage, they bought the house for £150,000 and it is now worth only £135,000. In order to switch to a repayment mortgage, would they have to save up the £15,000 difference between value and current mortgage + deposit of say 10% so, £30,000?

Additionally, to get out of it completely, would they have to save up the £15,000 difference + fee's and then sell off the house for the current £135,000 value?

HappyMJ

They should be able to make overpayments without having to switch. They will need the lenders permission to sell if the sale value will not clear the mortgage.

To remortgage to a new provider they can get up to around 90% of the current value as a new mortgage. So £135,000 * 90% = £121,500 so they'd need to find £30,000 from somewhere.

Dave_Ham

You are pretty accurate with your assumptions..

Although, their current lender may consider moving them onto a repayment mortgage if they speak with them first.

No other way I am afraid...

quantic

Thanks for the quick replies. Thats unfortunate - lots of years of saving/overpaying ahead it seems then...

Joe_Bloggs

Either way there should be some kind of savings being put towards the eventual repayment of the mortgage. Was there a savings method/vehicle in place ? Are there other higher interest debts that need to be taken care of ?
J_B.

quantic

Unfortunately no, I believe its was more a case of buying with interest only in the hope that house prices would continue to rise but they did the opposite.