Over 40,000 interest-only mortgages are set to end in 2020. If you have an interest-only mortgage, this means that for the length of the mortgage term you’ll have only been paying off the interest and not the capital, unless you’ve chosen to make overpayments. Some people may struggle to pay the balance at the end of the term or not know what their options are.Could remortgaging be the answer?
The aim of remortgaging is to cut the interest rate on your mortgage, freeing up some cash you could then put towards paying off the capital part of the loan. If you’re on your lender’s Standard Variable Rate, you could be paying over the odds as they tend to be higher than the interest in your initial deal period. Currently there are very low rates available so it’s worth checking if you could get a better mortgage deal and save some money. You may also be able to switch to a repayment mortgage, so you’ll be paying off both the interest and the capital. Something to bear in mind is that lenders will take your age into account when looking at affordability criteria, which may make it more difficult to secure a deal as it could make monthly payments very high. Another option that could be right for you is a retirement interest-only (RIO) deal. These mortgages are very similar to a standard interest-only mortgage, with two main differences:
- There's no end date to the loan; it's usually only paid off when you die, move into long term care or sell the house.
- Affordability is based on the income of the lowest earner.
Retirement interest-only mortgages are generally aimed at older borrowers who might find them easier to qualify for than a standard interest-only mortgage.
Other options:
- Using investments/assets to pay the balance
- Overpaying
- Equity release
- Extending your mortgage term
- Selling your home
If you’d like to find out whether you could remortgage either to a lower interest rate or to a repayment or retirement interest-only mortgage deal, we can help you. Our expert advisers will take your personal circumstances into account and search over 90 lenders to find the best deal for you. Our service won’t cost you a penny, so it’s worth finding out if remortgaging to a better deal is an option for you.
