to be so fed up that my house has not increased in value in TWELVE YEARS

[chocolatemixedwithdogfood]

That, really.

It's in a not very great part of Glasgow - not horrific but not posh either - but it was all we could afford at the time. We paid £165,000 for it in 2006. Then increased the mortgage by 10,000 so we could convert the attic. Thinking that within five years we'd sell it for around £200k and move somewhere a bit bigger as our family grew.

Upshot has been that its valued has remained what we paid for it at the very most - we were told that it would fetch between 150-165 maximum by an estate agent this year.

We have rented it out for the past six years as our family got bigger and we needed another bedroom. And we rent our house.

It's in good condition, lovely big garden, nicely painted, though the current tenants are not keeping it in great condition with their huge dog and it will need a massive deep clean when they leave, however they are good tenants in that they always pay on time and keep the garden nice, etc.

Just wonder if it will ever increase in value, and if we will ever be able to afford a bigger house or will be forever renting.

Interest only mortgage means you arent paying anything towards clearing the amount you borrowed, just paying the interest on that loan. If you have another vehicle/saving scheme for paying off the debt, rather than paying the loan back directly, that can give you flexibility (so you can skip paying into your savings one month if you need to do so).

But the OP has no plan to pay back the £175k she borrowed, just expecting the value to increase so when they sold they'd get back enough to pay the debt back and have some left over to buy a bigger house.

The world changed around 2008, from then on, you really should have a plan for how to clear the debt that's not just "when I sell it, i'll make a big profit". The OP seems to have got that now, the debt isnt going to be cleared for her by "the market", she'll have to pay back what she borrowed. Sadly think she got bad advice 12 years ago.

I can see how it is upsetting for you, but it's a long time for an interest only mortgage. On repayment you'd be halfway through the term with equity behind you. What happens at the end of an interest only term? Do they extend the term or are you expected to pay it all off?

And yes, houses in this street were selling for £100K in 2006 - bonkers, really. The two that have achieved that have since been sold on for less.

And I missed the interest only thing on first reading. The idea of interest only mortgages terrifies me, particularly the high salary multiple ones handed out like sweeties before the whole sub prime collapse. They were pushed hard enough in the 90s, when i took out my first mortgage - taking out ISAs as a means of building capital was the done thing then. I put my foot down then. I did again with this house. Both my parents and inlaws got stung by the panic over endowments not reaching sufficient value on maturation and were persuaded by hard sell to sell them on early. It's just too much of a gamble for ordinary people dealing with amounts of money they really cannot afford to lose.

We had a lot of pressure in the mid-2000s from family to get on the property ladder at pretty much any cost. If FIL had had his way we would have taken out a 110% (!!!) mortgage from Northern Rock and we would have swiftly ended up in negative equity. I have always been incredibly grateful that we ignored them.

Depending on who the interest only mortgage is with you may be able to repay some capital on a monthly basis.
You owe the bank the amount you borrowed so if you were to sell up they would need repaying the full 175k at point of completion.
If the bank will not accept regular overpayments then saving into an ISA maybe an option for you then you will have a lump sum, to put towards a mortgage In the future.
Interest only on residential still exists in the market especially on buy to let.
If you are declaring the income from your home you should be able to offset the interest from the mortgage when paying the tax via self assessment this is being phased out though now. I am assuming your mortgage providers knows it is now rented and you have landlords insurance otherwise if it burnt down your insurance will not pay out!

We bought our flat in Edinburgh for £144,000 in 2006 & now we are lucky if we can get £130,000 for it. We have rented it for the last 5 years but going to sell once this tennant moves & lose the money.

I don't think YABU at all. I'd be disappointed too. I think so many of us were sold up the river and got bad advice.

I'm a nurse. I know about medical stuff. I could give advice on medical stuff as that's my area of expertise. Mechanics? No. Interior design? No. Financial/property decisions? no!

In 2004 I went to a financial advisor who gave me shit advice about financial stuff. I sought independent advice and got it.

I'd never heard of sub prime and credit crunch.

My circumstances are not relevant, but honestly OP I completely understand your position.

Anyone saying'but why didn't you realise'? Is probably just lucky it hasn't happened to them. It's not a slur on your character.

Perhaps try to focus on the positive - you have had a home to live in without risk of rental increase or eviction. Maybe this is a blessing you could pass on to your current tenants?

But the OP has no plan to pay back the £175k she borrowed, just expecting the value to increase so when they sold they'd get back enough to pay the debt back and have some left over to buy a bigger house.

Exactly this.

You thought you were getting something for nothing, had no plan to pay back the capital and you'd be bailed out by property prices going on rising forever. You bought a house you couldn't afford and spent more money you didn't have, thinking you couldn't lose. Still, you think the problem is the fact that the market hasn't risen, it isn't, the problem is that you borrowed a sum of money you couldn't afford and haven't started to pay it back.

Yes the banks were irresponsible for offering mortgages to people who couldn't afford them, but the people who took them out and lived beyond their means and trusted that the property market fruit machine would keep paying out indefinitely hold the lion's share of responsibility.

Yanbu. Read through all the small print of your mortgage agreement carefully to see how you can change over to paying the mortgage off. Be careful that the bank doesn't change your t&c in the new agreement. Will Brexit be of any benefit to you?

The flipside is, if you live in an area where house prices are skyrocketing, you will find yourself in the same situation anyway. If your house price increases, you can guarantee that other bigger/nicer/whatever houses are increasing too, making it difficult, if not impossible, to move to something bigger.

We sold our flat (Sydney) for $350k in 2009. It sold in 2016 for over $700k. The issue is that everything else has gone up in equal measures, so while the profit looks great, if you're buying into the same area and you aren't downsizing, you end up in the same situation.

have you changed mortgage in the last 12 years at all?

im guessing you havent and the original discounted rate you got ended a long time ago, and you are paying a much higher rate than you need to be.

but then you have no deposit so youre stuck on it anyway. you really should go speak to an independent financial advisor to see if theres a way out of this mess

My sister and her DH have been doing as OP has and now they're very worried. They're older and owe a lot.

You need to get researching and seek advice. This can be quite a worrying situation as regardless of what happens you owe the bank £175,000 at the end of the term of your mortgage. Hopefully you'll be able to pay it off selling the house but you should start putting money aside in case of any capital repayment shortfall.

Interest only mortgages are dreadful. You're essentially just renting a home from the bank, with an option to buy.

My house has almost doubled in value in the last few years. All that means is that now DD won't be able to buy here unless she is doing a significantly fancier job than DH and me. It's not real money, it's smoke and mirrors.

We also paid 165k in 2006, but sold ours a couple of years ago at a 20k loss. We had to downsize due to losing job etc, otherwise we wouldn't have taken the hit, but we had no choice at the time. Bad times all round!

How much is your interest only mortgage? Our mortgage when we moved was for around £80k and following the interest rate drops, the current monthly interest is about £40 pm - surely your mortgage is tiny, so your problem is not related to the housing market, but bad luck (redundancy), life choices (SAHP) and head in the sand/financial ignorance (sitting on a IO mortgage, presumably paying almost nothing for 12 years). Or if the interest you've been paying is more than about £200 pm, you've been on a terrible, overpriced product. And as others have said, if the market had gone up, you would be in a worse position because a percentage increase in a more expensive house is more money, so it would cost you more to move, not less, if prices had increased.

We moved in 2006 and we're in West Yorkshire. Our house cost £110k and in the last 11 years, the value has probably gone down to around £90k before recovering to around £110-£120k, or I'd hope ours is worth slightly more (perhaps £130-140k maximum) as we've had a very large downstairs extension added. But in reality I'm not bothered as we're unlikely to move in the next 10/20 years, all being well.

Barbara. Interest on this product will be at least £800 pcm. At the start of any mortgage, the majority of monthly payment is interest. You only start actually paying decent chunks off until past the half way point of say a 25 year repayment mortgage. Op isn't repaying the debt. Only the interest, which as I say is likely to be around £800 a month. Idk what you are talking about. And I don't think you do either.

I do know what I am talking about, which is why the interest on my mortgage is less than 1% per year. We still owe around £50k, because we are in no rush to pay it off, with the interest rate being so low - we get more than that in cash savings.

£800 pm suggests an interest rate of over 5%, which is ridiculously high in the current climate, even some standard variable rates are less than half that amount.

The OP says that both she and her DH are earning a lot more than they did when they took out the mortgage, so whatever they are paying, they should have a lot more spare money than they did when they took out the mortgage, so they should easily be able to overpay their current mortgage, if that is allowed, or preferably live frugally for a few months or whatever it takes to save up a 10% deposit to get a better mortgage and make it repayment. Mortgages can be got for 2 or 3%, which would take hundreds of pounds a month in interest off the cost, if they are paying a high interest rate, so a repayment mortgage might not even cost much more.

What happens at the end of an interest only term? Do they extend the term or are you expected to pay it all off?

Depends on your current circumstances. If you meet the criteria in terms of deposit/income/age you can remortgage on a new repayment product.

If not, you are expected to sell up to pay it off. However, some people are finding themselves in a position where, due to their age, income, credit rating etc they do not qualify for a new mortgage, especially as it is so much stricter these days.

It is also surprising how many people apparently do not understand what the term 'interest only' actually means and seem shocked that their lender actually expects the money borrowed back at the end of the term. There was a thread about it on here a few months back and a woman (presumably a different person) who was featured on Radio 4s Moneybox.

I am boggled that banks were allowed to give out IO mortgages but not ensure the borrower took out a corresponding investment/savings vehicle.

Not surprised though - and I say this as an ex city analyst.

Next financial services scandal.

YANBU
This is the irony of so much focus/money on London and the SE - folk down in those areas do not seem to understand that not all of us have experienced rapid house price growth.
Even worse the London bubble money is increasing the prices of homes in rural and coastal areas where the well-heeled price out local people to get their second homes.
I bought my current house in the rural west midlands in 2010 - it has increased over the last 7 years by about 10% (maybe). Probably be bought by someone from the SE when I sell as they would view it a bargain.

This is a 100% interest only mortgage, no way would they be with a lender with a low SVR. It is likely that op could go onto capital repayment and not pay a bean more. Dh and I did when we changed from interest only to capital repayment. I'm quoting figures based on our mortgage on our PPR and we had a 50k deposit on a 380k mortgage so I added a little extra as the rates will likely have been kept artificially even higher. In any case, I'd be very surprised if op is paying hundreds less that I quoted. We were paying around £1500 interest only until a year ago on an svr of i believe 4.84%. This was purely a choice as we didn't want to remove capital from other investments making way more than this percentage btw.

mummy our io mortgage started off at around 5% and dropped like a stone when interest rates dropped. Which meant we've been massively able to overpay. Our mortgage payment now is around £225 pm on £350,000 mortgage.

Interest only mortgages can be brilliant if managed properly. You can overpay when things are good, and not if things are tough. We've been chipping away at ours, it was a massive £500,000 when we took it out.

Sorry to hear your situation OP. Just to make you feel worse I think there will be a crash at some point in the fairly near future. I think I might just sell now if I could and take the hit.

we got our io mortgage in 2007.

Interest only mortgage is not too different to renting . You would be very lucky to make money doing this although it's possible but yabu to expect to make money. Lots of factors affect how much a house sells for its impossible to predict how the value of a house will change in 5 years.