Homeowners with interest only mortgages are being forced to sell their properties ahead of repayment deadlines.
According to new research by equity release referral service Key Partnerships, 43% of estate agents have reported an increase over the past two years in the number of customers forced to sell in order to pay off interest only mortgages.
The research also shows that older customers are the worst affected by problems in paying off the capital on an interest only mortgage.
Interest only mortgages were popular before the crash in 2007, because the monthly payments were much smaller than traditional repayment mortgages. These repayments only cover the interest on the debt, not the principal loan amount, which still needs to be paid back at the end of the end of the mortgage term.
Almost 1.5 million interest only mortgages are due to mature this year, leading to fears many homeowners will not be able to repay the capital on the loan.
According to the Key Partnerships survey, while demand is increasing for solutions to interest only repayment problems, only half of estate agents believe they have enough information about these plans.
Will Hale, director at Key Partnerships, said: “Selling up to pay off an interest-only mortgage can make financial sense but it is worrying if older homeowners are being forced to sell and are not aware of all their options.”
While being forced to sell a property to pay off an interest only mortgage could be a problem for many homeowners, for others it may not even cover the capital on the mortgage.
If a property has fallen into negative equity, so the value of the house is less than the outstanding balance on the mortgage, selling the house will still leave them stuck with the remainder of the mortgage, potentially tens of thousands of pounds in debt, and without their house.
If you have an interest only mortgage on a property in negative equity, contact our expert team for a consultation and find out how we can help you.