Selling after an intrest only mortgage

Daddybear85

Hi if someone has a intrest only mortgage and it comes to end of term and mortgage provider was to sell the house to make there money back would "current owners" get any money or would it just sell to cover remaining mortgage? ( hope this makes sense)

jamesd

The owner gets any money left over and is liable for any shortfall. An owner selling will normally get a better price than a mortgage company selling so if a sale is required, best to do it that way. If the proposed asking price or agreed sale price is less than the amount of the mortgage, the mortgage lender must agree to the sale or it can't continue.

The mortgage holder would only sell after repossession or the less explicit way of handing the keys back to them. Any credible repayment plan should be sufficient to prevent repossession. Credibility depends on things like age and income. Downsizing or relocating to a cheaper part of the country could also help solve some problems, if the property value is far enough in excess of the mortgage or the mortgage lender is willing to provide another mortgage to facilitate this and reduce their exposure.

If other debts that are not secured are an issue, there are alternative ways of dealing with those, like IVA or bankruptcy.

To say much more we'd really need to know far more about the overall situation, to assess whether there are other options. Lenders are typically obliged by FCA requirements to at least try to find solutions that don't involve selling a home. Those don't apply to business loans, like those for BTL property.

Contemptuous

That's not how it works..

So there's no provision to repay the interest only mortgage? Was it always the intention to sell the property to repay it?

The lender wouldn't sell the property unless it was repossessed. It would be the owners who would put the property on the market, therefore it can be priced at whatever they want and, any money left once the mortgage was repaid would be the vendor's to keep.

jamesd

Contemptuous wrote: »

It would be the owners who would put the property on the market, therefore it can be priced at whatever they want

Ensuring that the mortgage charge on the property is going to be removed is one of the tasks for a buyer's conveyancer. The deal just will not proceed until the conveyancer is satisfied that it will happen.

Strictly that does allow a sale price below the mortgage value if other funds are available to repay the remainder of the mortgage.