interest-only mortgages…a ticking time bomb

The clock started ticking for a couple who approached us with an interest only mortgage. In 7 years time, they either had to come up with over £100k to pay off their mortgage, or sell their family home.

Because they were weighed down by unsecured debt, having to pay out £800 every month, they thought an interest-only mortgage was their only option (because it’s all they could afford), this being around £200 a month. Without even looking at bills and other essential costs, just these two outgoings were costing £1000 a month!

After a conversation with Dave our mortgage advisor, who presented a solution for their sticky situation, they were relieved to hear they could keep their house, clear their debt and start REPAYING off the mortgage!

How?

Dave simply offset their debt onto the mortgage by re-mortgaging and extending the payment term. So, moving forward they have one simple payment each month of around £700 and £300 left over that they didn’t have before. This means when the term ends, they’ll own their house outright and they can feel that little bit more comfortable having that bit of money to play with each month.

On top of this, Dave set up the correct protection to cover this new mortgage should anything happen to either of them between now and the end of their term.

As you can see, interest only mortgages really are a ticking time bomb. If you have an interest only mortgage, you should think about switching to a repayment deal, otherwise you’ll have to face the reality of losing your home if you can’t come up with a large sum off money.

For advice and support on interest only mortgages, give us a call 01633 987070.