I think anyone with an interest only mortgage without a repayment vehicle, will by now have a letter from their lender, warning them to make arrangements to repay their capital.
Nowadays, banks and building societies are reluctant to give mortgages to customers unless they pay capital as well as interest, but back in the day, interest only mortgages were as common as muck!
Borrowers whose endowment policies have gone by the wayside years ago, have been well warned to start making capital payments, but many interest only borrowers have simply done nothing.
The banks are starting to shape a solution to this problem in the form of a “Lifetime Mortgage.” In simple terms, older homeowners who cannot find a way of paying off their debt will be allowed to pay only the interest on their loans until they die, allowing them to stay in their home.
In return, borrowers would agree to give their house to their lender, rather than family, when they die. The bank would then sell the property and take the outstanding debt before passing the remaining proceeds to the estate.
Santander have announced that they will offer 'lifetime mortgages' from next year and other lenders are likely to follow suit.
Hopefully, once this batch of borrowers has been sorted, the next batch (the 40 something’s who all have to work well into their late 60s to get a pension) will all be fine, as they will have paid their loans back under the current rules. The 30 something’s however, won’t need to worry about having a mortgage when they retire, as they will presumably have to work until they fall dead at their desks anyway!
For more information or to speak directly to a mortgage advisor please contact us on 01628 507477.
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