Interest only mortgage term ended and husband refuses to downsize

He is wrong. If the mortgage term has ended the lender will want its money back - therefore it is sending letters to that effect. You both entered into a legally binding contract to repay the amount of the loan on a set date and in the meantime to pay interest. That contract has now been breached. If you don’t repay what you owe the lender will obtain a possession order from the court and you will be evicted and the house sold over your heads.

Taking out a lifetime mortgage from an equity release company might be an option if you can get one and afford the interest payments. I would hazard a guess that as your husband is retired that may not be affordable, and remember that money spent on interest is money you don’t have to enjoy life.

My advice would be to make your husband understand the debt must be repaid and that is best done by downsizing. You or he must communicate with the lender immediately or you will soon hear that they are applying for possession. I suggest you get your husband to phone them without delay, which will leave him in no doubt that he can’t just keep paying interest now.

Absolutely agree with the superior knowledge of GSM. I had a part interest only mortgage,vans before it was due, I received many letters from the building society to remind me I had a small shortfall which had to be paid by a certain date or action would be taken. You are at risk here

We were in a similar position, Daisy183, at the beginning of the pandemic. As we were in our 70's by then and classed by the NHS as 'vulnerable', we decided to go the Equity Release route borrowing enough to pay off the mortgage plus a few thousand more for a 'savings cushion' plus some expenses and repairs. There remains sufficient equity in the house for our two children to inherit but not enough to be claimed to pay for residential care should one or both of us need it -see below -. The house remains our home unless either of both of us require care elsewhere. Meanwhile we live on here 'rent' free for the rest of our independent lives. We used a company featured in the Radio Times and it was quick and straightforward. There is interest to pay when the house is sold as well as the amount we borrowed but it stillleaves the sum - about £25,000 each - which is the amount we are entitled to retain in the event we need to go into care. The interest rate remains the same for 17 years after which it no longer accrues but remains outstanding pending the end of both our lives. Going this route has enabled us to continue to have a good quality of life. It would probably be best for you to seek the advice of a financial adviser, though, as interest rates have risen steeply since Ms Truss's intervention.........!....and the right adviser may be able to recommend favourable rates.

Nothing to add. However you should thank GSM for explaining the position from a legal point of view. You should show this FREE advice to your DH before things deteriorate.

Germanshepherdsmum

He is wrong. If the mortgage term has ended the lender will want its money back - therefore it is sending letters to that effect. You both entered into a legally binding contract to repay the amount of the loan on a set date and in the meantime to pay interest. That contract has now been breached. If you don’t repay what you owe the lender will obtain a possession order from the court and you will be evicted and the house sold over your heads.

Taking out a lifetime mortgage from an equity release company might be an option if you can get one and afford the interest payments. I would hazard a guess that as your husband is retired that may not be affordable, and remember that money spent on interest is money you don’t have to enjoy life.

My advice would be to make your husband understand the debt must be repaid and that is best done by downsizing. You or he must communicate with the lender immediately or you will soon hear that they are applying for possession. I suggest you get your husband to phone them without delay, which will leave him in no doubt that he can’t just keep paying interest now.

Absolutely agree! Put the house on the market asap is my advice, you may not have a choice if it is repossessed and then you may not get any of the equity out of it.

I deliberately didn’t mention equity release because the rate at which the amount borrowed escalates, with compound interest, is truly alarming. At ages 62 and 72 you could be looking at 30 years’ compound interest.

Please take the advice from GSM, and don’t hesitate in contacting your mortgage lenders immediately. Good luck.

They could take an equity release plan that allows them to pay the interest at a fixed rate meaning they will still have equity in their home.We have friends who have just done this and it made their life easier,her Oh didn’t,t want to sell their home even though it’s too big for them to manage

That’s what I said - a lifetime mortgage - if they can afford the interest, which will probably be a higher rate than they are paying now. There’s so much more you can do to enjoy your later years than paying mortgage interest until you die.

You are a customer of your mortgage company. Shouldn't you be contacting them for advice on what they can offer? Ignoring their correspondence and not communicating with them doesn't seem like a safe route. I would call them and see if they have programs to fit your budget before hastily selling the home you want to keep. Interest only payments only work if all parties agree to this arrangement in writing and they have not agreed. You are bound by the terms of your existing contract.

Go for a lifetime mortgage (equity release) you can pay off your mortgage and possibly still get some money for repairs and any such thing you may need. The house will still be yours however the interest rate would mount up but who cares? It won’t affect you just any offspring you might have but then it’s you’re money to do what you like with I’ve done this years ago and even took out more equity to purchase a walk in bath, I’m still considering a further release as my house value has gone up over the years, best thing I ever did and my family agreed this was for the best. Go for it.

You have a contract with the mortgage company, you have been allowed to pay interest only for a short period, that period has ended.
They will repossess your house and you will pay the cost of doing that, you can’t win this one, sell and downsize.

Obviously GSM has made the solution quite clear, but may I ask a question?

I am curious to know if it was always the intention to simply sell, pay off the debt and move before it became due? Sorting of renting, but with benefits at the end?
When we moved here, we also took out an interest only loan, nowhere near £280K, so to qualify for that sum, you must’ve been high earners? During the term of the mortgage, we invested in various financial plans which on maturity would go towards paying off the capital before it became due and having taken early retirement a small portion of DH’s tax free lump sum made up the total repayment, as one of the investment plans hadn’t done as well as envisaged.
Were they PEPs and PIPs (personal investment plans).

Anyway, sorry if my question is intrusive, just curious.

If I may say so Bonnybanko, that is not good advice. You may not mind the value of your home being eroded by years of compound interest and your children receiving little when you die, but we are not all like that. Equity release is a matter for professional advice and it is not right for everyone,

My advice is to talk to the building society/ lender.
We were in exactly this position and tried to get another mortgage with another company and were
turned down.
We talked at length to our current people and they offered us a repayment mortgage until my DH was 89 with a repayment we could afford. We did put a lump sum in to reduce it somewhat.
Just saying if you talk to them they may come up with something you can manage. They keep this quiet and it's because they don't really want to get into repossession and all those costs for them.
Best of luck.

You can take equity release, but pay the interest, so that it does not roll-up at compound interest.

We investigated that, but were excluded because, for some reason you cannot get equity release if the footprint of any flat roofed extension exceeds the 35% of the footprint of the whole house. So we took out a lifetime mortgage instead. The difference is that with the equity release we could have stopped paying interest at any time or for short period of time, if we wished, while with the lifetime mortgage, if we miss any interest payment we are in arrears with all the consequences that could follow.

I am puzzled that you managed to get such a large interest only loan maturing after you had reached retirement age without needing to provide evidence of how you meant to repay the capital when the due date arrived. Or was the house itself the security for the loan and it was agreed that if, you could not repay the loan from other sources, the house would be sold to pay off the loan.

Either way your DH is giving a good impression of an ostrich, with his head in the sand, hoping that if he ignores this problem, it will disappear. In fact if he continues to act as he is now he will be devoured. The mortgage company will repossess your home and sell it cheaply in order to effect a quick sale to get their money back and you will have much less than £500k to spend on a new home.

Daisy, you have indeed been given excellent advice here. If you don't act, your mortgage provider will.
However, I would ask, hopefully not too intrusively, what was your husband's plan? As Georgesgran says, you will have known
that this situation was arriving, so what were his thoughts then? Has he changed his mind or did he have another plan in mind ?

You must have known long before it was due that the mortgage company would want it's money back. Did you not have a plan, most people tend to cash in investments etc or start the process to downsize at least a year before they have to come up with the cash. My son has years to go before he needs to pay his interest only mortgage off and has received letters offering him preferential terms to convert to a repayment mortgage and reminders that it will be due in full on the stated date. There can be no way he could plead ignorance and think he could just continue as he is.
I don't even think you'd get a lifetime mortgage for the amount you need unless I misunderstood the equity, is your house worth £500 k plus the 280 k that you still owe. I think your best bet is to speak to your Mortgage lender and see what they can offer you. Although that conversation should have taken place a year ago.

I worry about Daisy185. I fear the bailiffs might turn up one day.
Please talk to the lender ASAP. If your DH won't, you must.

The bailiffs won’t turn up out of the blue, only after the court has granted the lender an order for possession. The OP and her husband will receive letters from the lender about court proceedings before that happens. As I and others have said, communication with the lender is vital. Immediately.

is the house likely to sell quickly? is this what you would prefer?
Obviously I don;t know the legalities surrounding that wrt the lenders

At the moment no houses are selling quickly. The market has been almost moribund since Easter, awaiting the lwoer interest rates that keep being promised (and of course the result of the election)

That would mean that the lender might well choose to sell it to someone making a very low offer, just to get their money back as soon as possible.

Talking to their lender is essential.

I don’t think that Daisy is listening to the excellent advice she has been given. Perhaps her DH is the decision maker in the household and won’t listen to her?

is this the same person who is in arrears?