I’VE RUN OUT OF WAYS TO PAY OFF HOUSE LOAN
Financial worries or just looking for better value for money? Consumer champion Fergus Muirhead answers your questions
Q I FOUND your article on mortgage debt (November 17, 2017) extremely informative and interesting. Having retired, I sold my previous house and moved back to Scotland and bought another property. I took out an interest-only mortgage on this property really because my endowment policy from my previous property still had a few years before it matured. Once the endowment matured, the plan was to change to a repayment mortgage but unfortunately I lost out because of the age 75 limit. The endowment policy paid out less than expected so I had to have a rethink. I had some investment savings plans and these have been increased over the years. As well as that, I have been repaying the capital outstanding within the limits of the mortgage. A large deposit of £100,000 was paid at the time I bought the property. I have a state pension as well as a pension from the civil service and my son and daughter, who are both single and live with me, are both in work. There are just over two years before the mortgage matures and I would appreciate some advice. I may have nothing to worry about and the mortgage could be paid off in full – but should there be a small shortfall, what options would you advise me to consider? The shortfall could be £5000 to £15000 and the time to pay would be three to five years. I have no other debts and have reduced some of my household costs. I try to pay off about £8000 of the mortgage capital annually. I would be grateful for any advice you are able to give me. Anon A THE mortgage question I answered last week dealt with someone looking for a new loan.
So, this week, we can look at the other end of the loan and see what happens at the end of the mortgage term – especially if you have an interest-only loan and will still owe money at the end of that term.
The first thing to consider is what other funds you have to repay the loan. You mention savings that you have elsewhere but don’t say whether they will be sufficient to repay any outstanding mortgage – but that is certainly one option you should consider.
Another would be to calculate how much will still be outstanding at the end of your mortgage term and divide that amount by the number of months you have left and start to save that amount each month in a savings account or ISA.
It’s possible that you could remortgage at the end of the term,