Interest only mortgage without repayment vehicle

Misteek

So my sister has only realised she has 8 yrs left on an interent only mortgage.  Her partner at the time did all the paper work and wasng aware she has no means of paying the capital  at the end.

Her wage isnt that high and cant go on a repayment mortgage?

What will be her options as of now? 

Can she turn this hous as wheres shes living into BTL ptoperty and she moves back with the parents?

Or how about selling the property now?

How does she go about aby of this?

MovingForwards

Start overpaying.
Sell in 7 years.
BTL would possibly be a headache with one property and the regs / rules to follow.

There may be other options, but you've provided next to no information.

How old is she?
What is her rough annual income?
How much is the mortgage debt?
What's the value of the property?
Does she have any other debts eg credit cards, loans, PCP, car finance, catalogue etc?
Does she have any CCJs, IVA, missed / late payments, defaults etc or ever been made bankrupt?
Any school age children? If so, how many?

penners324

Options;
Remortgage now to repayment mortgage.
Sell the property (using the equity as a deposit on somewhere else).

What will turning it into a buy to let do? She'll have to Remortgage to a buy to let mortgage anyway.

steampowered

What interest rate does she paying? If she hasn't remortgaged for years she will likely be paying a very high rate (e.g. 4.5%). Yet the cheapest rates on the market are below 1%.

It might be possible for her to remortgage onto a repayment mortgage, so that she starts paying off the capital, without increasing her monthly repayments. 

It might not be possible to clear the whole mortgage over the next 8 years. But if she can take out (for example) a 20 year repayment mortgage, she could be repaying the capital over time without increasing her monthly payments or selling the property. Even if she does want to eventually sell the property, it is a good idea to pay off as much capital as possible!

Misteek

penners324 said:

Options;
Remortgage now to repayment mortgage.
Sell the property (using the equity as a deposit on somewhere else).

What will turning it into a buy to let do? She'll have to Remortgage to a buy to let mortgage anyway.

When you say equpty in thhe property. Am i right thinking that will be from the house value may have increased slightly? As she hasnt paid any capital yet.

BTL. Was so that she can a tenant to pay rent and she can move with the parents as he income isnt high enough for a repayment mortgage for the property. Atleast with a BTL she will be able to pay towards the house if that makes sense?

Misteek

steampowered said:

What interest rate does she paying? If she hasn't remortgaged for years she will likely be paying a very high rate (e.g. 4.5%). Yet the cheapest rates on the market are below 1%.

It might be possible for her to remortgage onto a repayment mortgage, so that she starts paying off the capital, without increasing her monthly repayments. 

It might not be possible to clear the whole mortgage over the next 8 years. But if she can take out (for example) a 20 year repayment mortgage, she could be repaying the capital over time without increasing her monthly payments or selling the property. Even if she does want to eventually sell the property, it is a good idea to pay off as much capital as possible!

Thank you. I will ask her what interest rate shes paying currently after work as I dont know the figures.

So just to clarify. If she goes onto a repayment mortgage for 25 years.  Does that mean shes basically been paying interest for 17 years and that really doesnt count for nothing now? As no capital was ever paid it as if starting over again?

Misteek

MovingForwards said:

Start overpaying.
Sell in 7 years.
BTL would possibly be a headache with one property and the regs / rules to follow.

There may be other options, but you've provided next to no information.

How old is she?
What is her rough annual income?
How much is the mortgage debt?
What's the value of the property?
Does she have any other debts eg credit cards, loans, PCP, car finance, catalogue etc?
Does she have any CCJs, IVA, missed / late payments, defaults etc or ever been made bankrupt?
Any school age children? If so, how many?

Sorry  i dont hhave the full info on hand. Ill get that and post back later.

Thanks

touch1337

Misteek said:

So just to clarify. If she goes onto a repayment mortgage for 25 years.  Does that mean shes basically been paying interest for 17 years and that really doesnt count for nothing now? As no capital was ever paid it as if starting over again?

In terms of the mortgage, yes. She's only paid interest on the loan and the outstanding amount is the same now as it was when it started.
Realistically, no. It doesn't count for nothing, it has been a huge benefit to her to have the mortgage. She has saved 17 years of rent payments by having this mortgage. Also the house will be worth more now. Most likely she'll be more than £100,000 better off from having had the mortgage than if she didn't have one.

Thrugelmir

Misteek said:

 Her partner at the time did all the paper work and wasng aware she has no means of paying the capital  at the end.

Her wage isnt that high and cant go on a repayment mortgage?

What will be her options as of now? 

Can she turn this hous as wheres shes living into BTL ptoperty and she moves back with the parents?

Or how about selling the property now?

How does she go about aby of this?

Presumably her partner is still on the mortgage and therefore a part owner still. If so adds another level of complexity potentially. 

jimjames

Are you saying that her lender has made no contact since the mortgage was taken out to let her know that it is interest only and to check the method of payment she is planning for the balance? Or is the partner intercepting all correspondence - if so does that mean they are still on the mortgage?

getmore4less

steampowered said:

What interest rate does she paying? If she hasn't remortgaged for years she will likely be paying a very high rate (e.g. 4.5%). Yet the cheapest rates on the market are below 1%.

It might be possible for her to remortgage onto a repayment mortgage, so that she starts paying off the capital, without increasing her monthly repayments. 

It might not be possible to clear the whole mortgage over the next 8 years. But if she can take out (for example) a 20 year repayment mortgage, she could be repaying the capital over time without increasing her monthly payments or selling the property. Even if she does want to eventually sell the property, it is a good idea to pay off as much capital as possible!

steampowered said:

What interest rate does she paying? If she hasn't remortgaged for years she will likely be paying a very high rate (e.g. 4.5%). Yet the cheapest rates on the market are below 1%.

It might be possible for her to remortgage onto a repayment mortgage, so that she starts paying off the capital, without increasing her monthly repayments. 

It might not be possible to clear the whole mortgage over the next 8 years. But if she can take out (for example) a 20 year repayment mortgage, she could be repaying the capital over time without increasing her monthly payments or selling the property. Even if she does want to eventually sell the property, it is a good idea to pay off as much capital as possible!

lets say they can get the best rate on the market ~1% as the value has gone up to get to 60% LTV.

use £100k as a base (this scales)

20 years

rate	fees	payment	add fees	interest only
1.00%	£0.00	£459.89	£459.89	£83.33
3.00%	£0.00	£554.60	£554.60	£250.00
4.00%	£0.00	£605.98	£605.98	£333.33
5.00%	£0.00	£659.96	£659.96	£416.67

25 years

rate	fees	payment	add fees	interest only
1.00%	£0.00	£376.87	£376.87	£83.33
3.00%	£0.00	£474.21	£474.21	£250.00
4.00%	£0.00	£527.84	£527.84	£333.33
5.00%	£0.00	£584.59	£584.59	£416.67

Looking more like 25y than 20y

Once the OP gets the numbers it could be looked at 
with 8 years left from that mortgage  age may be a limiting factor here.