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Helping You Make the Most of Your Mortgage

Tuesday, 22nd April, 2014

I've made payments on time all year, but my mortgage balance hasn't gone down at all. Why is that?

This is because you have an Interest Only mortgage, which means that your monthly payment does not go towards paying off your mortgage balance. It only covers the interest charged on the amount you have borrowed.

I have an Interest Only or part Interest Only mortgage. How do I make sure the mortgage is paid off by the end of the term?

With an Interest Only mortgage, you're simply paying off the amount of interest you owe each month on your mortgage. At the end of your mortgage term you will still owe the original amount you borrowed (the capital).

An Interest Only mortgage normally requires a separate savings or repayment strategy running alongside it, which you pay into on a regular (usually monthly) basis. At the end of your mortgage term, the funds invested in the repayment strategy should be used to pay off your mortgage balance.

It is your responsibility to repay your mortgage by the end of its term. It is therefore important that you regularly monitor the performance of your repayment strategy during the term of your loan, to ensure that it is on track to repay the capital sum at the end of your mortgage term.

I've got a repayment strategy in place for my Interest Only mortgage (an endowment policy or other investment plan) and I'm worried that it isn't performing well. What do I do?

If you have an endowment policy in place to pay off your mortgage, you should receive an annual statement from your insurer which will indicate whether your policy is on track to repay the required amount. You can also contact your investment company directly to get an update.

If your means of repaying your mortgage is via an ISA or personal pension, you may need to ask your provider to give you an up to date projection of the value of your plan.

If either your endowment statement or pension/ISA projection indicates that there is a potential shortfall, it is important that you act straight away.

One of your options may be to transfer the Interest Only element of an Interest Only or Part & Part Loan to a full or partial Repayment basis, to cover the shortfall amount (so that your mortgage payment reduces the capital sum you owe as well as paying the interest). If this is what you decide to do, just get in touch and we can sort it for you quickly and easily.

I haven't got a repayment strategy in place to pay my Interest Only/Part Interest Only mortgage - what can I do?

You may have originally taken out an Interest Only mortgage, or switched your mortgage to a full Interest Only or Part Interest Only basis part way through your mortgage term. If you do not have a repayment strategy in place to repay your Interest Only balance at the end of your mortgage term, you should speak to an independent financial adviser to make arrangements.

Alternatively you could contact your mortgage provider if you decide to switch your mortgage to a full or part Repayment basis (where your mortgage payment reduces the capital sum you owe as well as paying the interest), or to discuss the other options that may be available to you.

If you do not take steps to ensure that you are able to repay your Interest Only balance by the end of your mortgage term, there is a real risk that you may reach the end of your mortgage term still owing part or all of the capital you initially borrowed. The sooner you act the more options you are likely to have.

It is your responsibility and legal obligation to ensure that you repay your mortgage by the end of its term. If this is a concern for you, you should take action now.






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