Mortgage problem

Marty149

Any advice be very much welcome ,firstly very worried and scared of the future as  I’m stuck in interest only mortgage and have been for 20 years I know its been very stupid of us but with family children over the years I'm now 52 years old, we’ve just plodded on, now in situation where mortgage has tripled almost finding it difficult each month ,I think about it quite a lot on our future messed up, our mortgage is probably around 40% of our property , so stuck in which way to turn now!  Scary 

The_Unready

Are you on your lender's SVR? If so, can you remortgage to a lower rate, and perhaps convert it to a repayment mortgage?

Marty149

Yes I am currently 7.24 have contacted them can go into 2 year fixed 6.22 repayment monthly cost is so high , so stuck it’s frightening really, 

MattMattMattUK

Marty149 said:

Yes I am currently 7.24 have contacted them can go into 2 year fixed 6.22 repayment monthly cost is so high , so stuck it’s frightening really, 

How much equity do you have, enough to downsize and buy somewhere you can afford? 

400ixl

Being on an interest only mortgage is not necessarily a bad thing provided you have the capital repayment side in hand.

I take it then you haven't taken out any investment mechanism such as an endowment to repay the capital? Given this is now 20 years on, and is 40% of the value of the house, how much is the actual interest only mortgage?

Is the mortgage term currently 25 years, so essentially only having 5 years to run, or have you extended the term?

If you are struggling with the interest only payments, it doesn't sound like converting it to a repayment mortgage on the same term length is going to be a starter.

At 52 years of age, you could potentially look to convert it to a 15 year repayment mortgage. May not reduce the monthly amount, but would at least be paying off the capital and give you somewhere to live when you reach national pension age.

Sounds like you need to go and have a conversation with an IFA / Mortgage broker pretty quickly to work out a long term plan to get you back on track.

Marty149

Things happen in life we really needed to sort this out a few years back in which we intended to do , we have around 35k savings that was hoping for our future, we have no endowment policy , even if we look to move in our area there’s not much option, not sure be the happiest thing to do 
147k we’ve owed for 20 years interest only house value 380k /400 ,we gutted I know it’s own fault, at our age feel up against a brick wall as we’re not huge earners , messed up ! 

silvercar

Take a repayment mortgage over a far longer term eg until retirement. Some lenders will lend til your 75. By the time that mortgage needs repaying your children may have left home and you could downsize.

MWT

As suggest, first step is to stop things getting worse, so if the nature of your employment is something you can reasonably claim to still be doing in your 70's then change to a repayment mortgage over the longest term you can get.

It doesn't mean you will necessarily still be working right till the end as you will have other options as you get older, but for now the aim is to start reducing the outstanding loan amount.

As you get into your 60's review options like a Retirement Interest Only mortgage (RIO) or a Lifetime Mortgage with interest rolled-up (Equity Release).

The RIO will only be practical if you have decent pensions, not just depending on the State Pension, and the affordability will be assessed on each life separately not jointly, to ensure it is still affordable regardless of what happens.

The Equity Release option will allow a larger amount to be released as the age of the youngest life increases and at some point that will be larger than the reducing balance on the existing mortgage so that could be an option, and it is not dependent upon income. ... but in general this should be the last option not the main plan, as it does take away/reduce other options in later life to fund health care from the capital for example, and downsizing should always remain a preferable option if possible. 

I would suggest you contact a good broker and talk about your options for a repayment mortgage as a starting point, don't just look at your current lender.

ACG

Can you afford any overpayments? £50 a month for example? That would bring your balance down by around £15k over 25 years. 

Its not a case of repayment or interest only. 
You can do interest only and then make overpayments. You bring the balance down and whilst you might not be able to pay it off before you retire you may be able to make a significant dent into the debt. That migth give you more (or better) options when you do come to retire. 

MWT

ACG said:

Can you afford any overpayments? £50 a month for example? That would bring your balance down by around £15k over 25 years. 

Its not a case of repayment or interest only. 

Not wrong of course, but I got the impression that there wasn't all that long left on the current mortgage term as they are 20 years in... ...and I doubt they are going to get another interest only mortgage these days...

Perhaps part IO part repayment might be possible on a new loan?

ACG

MWT said:

ACG said:

Can you afford any overpayments? £50 a month for example? That would bring your balance down by around £15k over 25 years. 

Its not a case of repayment or interest only. 

Not wrong of course, but I got the impression that there wasn't all that long left on the current mortgage term as they are 20 years in... ...and I doubt they are going to get another interest only mortgage these days...

Perhaps part IO part repayment might be possible on a new loan?

Your right, I did 24 years rather than 14. 
I think the point stands though, albeit closer to £9k at £50 a month. But you would like to think in 5 years time they may be able to up that £50 and it also has the compounding effect so will build up quicker. 

Ultimately doing nothing is going to see them in the same spot now when they come to retire. Overpaying brings the balance down and builds up more equity. 

There are interest only mortgages out there. Rates are not great but will likely be better than 7.2%.