Interest only mortgages

Rosie1959 - thank you for your advice. I do really need to go to see a mortgage broker.

My thoughts were to save up as much as I could to go towards paying as much as I could off the mortgage and then re-mortgage. I thought it would work out less expensive to do this as I would not be borrowing as much in two years. But then again, I am paying more interest now than if I had made additional payments.

We owe £80k but the house is worth around £280k. We had a repayment mortgage originally but converted it to interest only when we both lost our jobs 15 years ago. We are both employed now and should have converted it back really.

I thought if I could save at least half of the outstanding amount (before the mortgage is due) I would only need to borrow £40k so the payment would be lower.

I think it might be sensible to pay some off now. The money is in an ISA but is only making 1% interest.

maddyone

We had one too. At one point it was almost impossible to get a normal repayment mortgage. We had an endowment policy to pay off the cost when the mortgage finished, but like rosie we swapped it for a normal repayment policy quite soon. We kept the endowment policy and it matured as we approached retirement.

We had two as well, as advised at the time. They were popular in the 1980s when interest rates were high and good returns were expected on endowment policies.

However, our main one failed to reach the amount required. We luckily had some redundancy money (a double-edged sword) which we used to pay off the mortgage.
We also had a small one for an extension and the insurance company did make up the payout to the amount it should have reached.

I would never have taken out another one.

tanith

Thanks, i guess people have their reasons but it seems unfair to blame the banks for what is at best poor judgement on the part of the mortgagee.

We tried to get a Building Society repayment mortgage in the mid-1980s but they were not offered at the time.
The Building Societies were linked to the insurance companies and endowment mortgages were pushed heavily.

It was a miss-selling scandal..

PinkCosmos
I'm not sure if this will work or how up-to-date it is.

11014505-ewsni-endowment-mortgage-complaints-pdf-5.pdf

Perhaps you can paste it into your browser.

Callistemon21 - thanks for the link. unfortunately it won't work when I click on it or paste it.

We are in our late 70s and took out an interest only mortgage last year to pay for an extension. The loan is not large in absolute terms, in loan to house value nor loan to income. We could have borrowed much more had we wanted to, but we didn't. It will be repaid when we sell the house and down-size or when we die.

It made absolute sense to build the extension, which adds considerably to the value and saleability of the house, as well as increasing our enjoyment of living in it and when we move on, repaying the capital from the house proceedings will not in anyway limit our choices when we downsize.

JenniferEccles There are times when interest only mortgages, thought through and considered, make absolute sense.

We had an interest rate only mortgage attached to an endowment policy. It was taken out before endowment policies became inadviseable and it paid out the full amount we required plus a small surplus.

All these different ways of borrowing can be perfect solutions or total disasters depending on the when and how people use them, plus of course those rare black swan events that can upset things, no matter how careful you are.

We had a part repayment part interest only mortgage from a building society, the interest only is £20k.

Halfway through the mortgage term, my husband started making overpayments into the flexi account. At the end of the mortgage term, we had a very small shortfall which we cleared from our savings.

As I recalled, the building society never asked us to take out an endowment policy for the interest only mortgage, I told the mortgage broker I had enough in my overseas pension to clear the interest only portion and he accepted that.

I did took an endowment policy with my bank but I cancelled it six months afterwards and threw the paper work away, which is not clever of me.

We had a low cost endowment mortgage and it turned out to be the best investment we ever made. We paid our mortgage off early so didn't need to use the endowment and it has improved our income in retirement.

PinkCosmos only another suggestion see a Broker ASAP and see about getting a fixed rate as then you will know how much you will be paying, rates are going up so fixing now might be a good idea. See an all of the market broker they will have access to the biggest range of products.

Thanks Rosie1959 I do need to see a mortgage broker rather than trying to guess which is the best option. Thanks

You need to think seriously before making such a decision. If you are 65 years old, there are still chances of getting a mortgage. But if you are already 70 or more, it is better to leave this idea. Banks will not work with borrowers of this age as part of a mortgage. A loan, a credit card — will be given, a mortgage - no. When choosing a bank, look at the age requirements. The specified upper limit is at the time of cancellation according to the schedule. Try using Mortgage Broker Bath to draw up the right contract, if you still decide.

MissAdventure

I suspect people were encouraged by hard sell from their banks and building societies at the time.

This^
We had an endowment mortgage from 1990.....when we moved home in 97 it became obvious it wouldn't cover the final payment....we went to the ombudsman who agreed we had been misold..... we then took out a repayment mortgage for new house less the 10k we had been awarded by ombudsman.....this put us back on track ....it was very normal back then though to have that type of mortgage....we were young and green

We took out a large interest only mortgage when we returned from abroad in our 50s and were buying in London. We suspected that down the line property prices in the area would rise astronomically, and also we envisaged selling our properties abroad which usually takes a bit of time. Luckily it all worked out and we then upsized, took out another interest free mortgage, sold 5 years later with another profit and then paid everything off with no penalties. It is possible if you play the Monopoly board a bit and are risk averse.

Tanith we have a Retirement Interest Only Mortgage. They are standard products and you repay the capital sum when you downsize, go into care or die, just like equity release, but you pay the interest rather than roll it up.

We took it out last year to help finance an extension we were building.

From what the OP says. I think these people probably have ordinary mortgages. In which case they should have planned ahead. They would always have known that the capital had to be paid back and when. It is too easy to blame the banks/building society, but basic things like this do require individuals to act sensibly and take responsibility for their actions They will have had these mortgages for some time, so have had plenty of time to think about what to do.

The way out for many may be Retirment Interest Only Mortgages or Equity Release.