At the end of an interest only mortgage term many people find themselves unable to pay the balance owed and risk losing their homes. However, all is not lost and several options are available.

Downsizing

This is probably the most obvious option. By the time your mortgage term ends it is feasible that you have had a family who have grown up and fled the nest, so a smaller property may be on your mind. The downside of this might be that your initial deposit was very small and selling the property does not cover paying off the mortgage.

Remortgaging

Depending on your age and other factors such as health you could secure another mortgage term at a lower rate, enabling you to overpay or save towards a final lump sum.

Extend your mortgage term

In the same vein as remortgaging, you might be in a position to extend your current mortgage term. This would give you longer to save the funds for the final payment. Switching to a repayment, or part-repayment could happen at this time.

Investments and savings

If you have an ISA, endowment or other savings account, cashing it in to be used towards the lump sum would be wise.

Endowment policies have generally underperformed, but your projected maturity figures can be acquired from provider.

A tax free lump sum from a pension can also be accessed and used with limitations.

Equity release

A growing trend, with many adverts popping up on Television and Radio, this involves borrowing against your property.

It is in effect another mortgage, but without a specific end date. Instead it expires upon your death or need to go into care.

If you struggle to make your interest only payments, and know nothing short of a lottery win will allow you to settle your lump sum at the end of the term, then this could be an option.

Generally, you will no longer need to make monthly payments, but instead the interest is added to your borrowed capital.

If you have children, perhaps telling them you have done this is advisable. Whilst they may enjoy seeing you in a worry free financial position, they may be shocked upon your death if they were expecting a hefty inheritance.

Which brings us nicely to one final option.

Ask your children to pay!

If you want to pay the interest on your equity release loan it will lessen the final debt. If your children can contribute to this it will benefit them in the long run.

Although the thought of any of the above is not a pleasing picture, it is better than the alternative. Doing nothing and burying your head in the sand like the proverbial Ostrich could very well lead to the worse case scenario of repossession, which no-one wants to see or experience.

Contact Sara to discuss your needs.