Interest Only Mortgage Ending

andrew_bott

Hi, apologies if this has already been addressed but I could not find a thread anywhere.

I have an IO mortgage with Birmingham Midshires (£184000 outstanding, Property valued at £410000)  that comes to an end in July 2028.  I am currently making overpayments weekly (£500) and think I will be able to clear the balance by the end of term no problem as I have another property to sell.  My question is, if there is a balance at the end (lets say £30000) what will happen if I cannot clear it in one go?  Will I get repossessed immediately?  Given that I will own circa 92% of the property in this scenario is repossession unlikely?  Do BM sometimes extend the term if a customer has been actively overpaying for a period of time.  Any advice appreciated?

Again I am confident this scenario will not arise but I always like to have every eventuality covered.

Thanks,
Andrew

Thrugelmir

Is this a residential mortgage? 

andrew_bott

Hi, yes residential.

Thrugelmir

BM no longer offer them. Just BTL.  Plan B could be to remortgage elsewhere. 

andrew_bott

Thanks.  Yes they said they don’t offer residential mortgages anymore.  I don’t want to remortgage at present but I just wanted to see if there was a scenario that plays out if I have a little balance left.  Does the % of the property I own have an impact, etc.

Thrugelmir

andrew_bott said:

Thanks.  Yes they said they don’t offer residential mortgages anymore.  I don’t want to remortgage at present but I just wanted to see if there was a scenario that plays out if I have a little balance left.  Does the % of the property I own have an impact, etc.

Remortgage before the IO mortgage term ends seems the straightforward option. Anything else is subjective given it's years away. BM will hold all the cards as you'll be in breach of the mortgage contract. Intentionally defaulting will most likely result in additional charges being levied. 

Petriix

Remortgage, sell, or clear the balance by sourcing funds from elsewhere (remortgage a second property etc).

K_S

@andrew_bott I can't speak for your specific case, but generally speaking, at the end of an I/O mortgage for a property that is the borrower's primary residence, lenders usually show flexibility as long as there is a clear plan to exit (sell the property, remortgage in progress, alternate finance being arranged, etc.) that can be evidenced and the regular payments are being made. I'm not sure the history of overpayments will make any particular difference either way.

Mind you I'm talking about relatively short periods of forbearance such as 12-18 months to make a sale, etc. and the lender may add minor fees/charges for the admin involved.

Applying for repossession of a primary residence is usually the very last resort for mainstream lenders and given the limited info in your post, I would be surprised if it came to that unless you completely broke off communication, stopped payments or didn't offer any details of an exit plan.

dimbo61

If you can pay off £26,000 each year you will be reducing the balance and Interest charged.
In six years time you might well have the balance down to £25/30,000

getmore4less

What rate are you paying now?