More than 100,000 interest-only mortgages will mature this year – but that still leaves over 1.5 million interest-only home loans outstanding. The Telegraph looks at several solutions to repay.
Mortgage watchdogs fear many people in this position “do not have an appropriate strategy” to repay loans.
The Financial Conduct Authority (FCA) has said it will investigate how lenders are treating borrowers as their mortgages approach maturity.
The FCA says there are three peaks when the bulk of these loans will mature.
These are: 2017-18 as a result of endowment mortgages sold in the Nineties and Noughties; 2027-28 from loans taken out between 2003 and 2009; and 2032 partly resulting from conversions to interest-only mortgages during the term.
Telegraph Money has identified the six best ways to pay off outstanding interest-only debt. The potential pitfalls are also listed. If one solution doesn’t work for you, move on to the next.
Ways of repaying an interest-only mortgage
- Downsize property
- Extend your mortgage term
- Remortgage to a lower rate and overpay
- Use other savings and investments
- Release equity
- Ask your children for financial assistance
Solution 1: Downsize home
The simplest solution is to sell your home and move to a cheaper property. The proceeds from the sale will be used to pay off the outstanding mortgage balance.