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Original poster

So what happens if you CAN'T pay the repayment part of your mortgage in this situation?

145 replies

LaurieFairyCake · 17/08/2023 07:41

Citizens advice website says the lender is obliged to consider options if you can't pay - like shifting to interest only

A year ago we asked our lender to shift to interest only as there's enough equity to sell off our flat and pay off our second home (where we want to retire to)

They said no as we have to earn £150,000 a year to do that Hmm

Now we HAVE been allowed as the government has forced them to do it for 6 months

We want to keep that going and just pay interest only until we retire in 10 years, sell our flat and pay off our second home

Are they likely to let us?

(My health means that trying to do two jobs is too much for me and at some point I'm going to burn out and HAVE to shift into one job. We can't go and live in our second home and give up work as we're too young)

OP posts:
Phos · 17/08/2023 07:47

There is a huge interest only timebomb at the moment as so many people have IO mortgages coming to end of term and no viable repayment method. The regulators are all over this so obviously lenders tread carefully. If you want an IO mortgage, make sure your capital repayment is absolutely secure and watertight.

There are lifetime mortgages where you pay IO until you die and then the house is sold to repay the capital but it sounds like you’re too young to want to consider that.

Phos · 17/08/2023 07:48

Also lifetime mortgages carry a risk if house prices fall.

RaidFlySpray · 17/08/2023 07:49

I'm really sorry that you're in this position, it must be awful. But it doesn't sound to me like you can afford two homes.

Original poster
LaurieFairyCake · 17/08/2023 07:50

Even if there's a risk of prices falling there's still enough to pay off both mortgages

We could try another lender in 6 months for an interest only mortgage - rather stay with ours though and force them to not be twats and say we have to earn £150k a year to be 'allowed' to Hmm

OP posts:
OttilieKnackered · 17/08/2023 07:50

Surely everyone is going to say sell your second home. Assume you don’t want to as you’d never afford equivalent at today’s prices, but two houses is a luxury you surely can’t afford it you’re struggling to pay for the primary one?

Timeforabiscuit · 17/08/2023 07:51

So you have two houses and you can't service the debt on both of them, and you want the bank to wait ten years?

I don't think they'll let you, you won't be made homeless if you sell.

Original poster
LaurieFairyCake · 17/08/2023 07:51

The other 'home' is rented out and it already pays for itself - so there's no benefit to selling it at all (no equity and in an inexpensive non-fancy part of the country where we're both from)

OP posts:
drpet49 · 17/08/2023 07:51

You have two homes. Let me get my violin out.

hockeysticks89 · 17/08/2023 07:52

You may have to remortgage, if you have 20-30% equity there are loads of lenders who will do interest only with the sale of another property, no minimum income. See a broker

CrapBucket · 17/08/2023 07:53

It’s not about being allowed. But it’s simple maths - the lender is a business- what’s in it for them to do this? It doesn’t sound like they will make much profit from you hence they don’t want you as a customer. This sounds harsh but isn’t meant to - I wish you luck.

Original poster
LaurieFairyCake · 17/08/2023 07:54

We don't 'have' 2 homes - we bought this cheap terrace to retire to when my husband was working - he's now to ill to do the previous job and works in a job at one third of his previous salary (he contracted Long Covid since we bought it)

I don't want to retire there yet as I still have a good job and can pay the interest no problem at all. My job is where we live and not moveable to the retirement property.

OP posts:
Monkeylimas · 17/08/2023 07:54

See a mortgage broker. Other lenders do allow this in certain circumstances - there are various lenders with different criteria on interest only hopefully your situation will fit with one.

Original poster
LaurieFairyCake · 17/08/2023 07:55

All the profit lenders make is on the interest part Confused

They make MORE from you if you pay the interest part longer as the overall debt stays higher

OP posts:
Original poster
LaurieFairyCake · 17/08/2023 07:56

I'm basically very happy to pay the interest part for 10-15 years and then retire

OP posts:
Original poster
LaurieFairyCake · 17/08/2023 07:57

We have 50% equity

OP posts:
Phos · 17/08/2023 08:00

LaurieFairyCake · 17/08/2023 07:50

Even if there's a risk of prices falling there's still enough to pay off both mortgages

We could try another lender in 6 months for an interest only mortgage - rather stay with ours though and force them to not be twats and say we have to earn £150k a year to be 'allowed' to Hmm

They’re not being “twats” and you can’t “force” them to change their lending criteria because they don’t suit you.

BorneoBound · 17/08/2023 08:01

CrapBucket · 17/08/2023 07:53

It’s not about being allowed. But it’s simple maths - the lender is a business- what’s in it for them to do this? It doesn’t sound like they will make much profit from you hence they don’t want you as a customer. This sounds harsh but isn’t meant to - I wish you luck.

I have to disagree with this maths. The capital repayment isn't the profitable part for the bank, the interest is. If OP doesn't pay down her mortgage then the interest, and therefore banks income, will actually be higher. If the poster has a strategic exit I don't see what the issue would be.
OP shop around. There will be other lenders, trying to force your current lender doesn't sound like an option

MammaTo · 17/08/2023 08:35

But the only reason you have IO is because of this 6 month break which is supposed to be used to ease the COL crisis for people. If your home is unaffordable on the originally agreed terms then the bank would take you down a legal route and eventually (many years down the line) look to repossess.
You can see if you can swap to another lender on IO but I’d imagine you’ll have to prove what your going to pay off the capital with.

NotTellingYouMyRealOne · 17/08/2023 08:39

We have IO on our rental property, and repayment on our residential property. The banks are fine with that as we could sell the rental without making ourselves homeless. Would that be an option?

Original poster
LaurieFairyCake · 17/08/2023 08:55

So we have interest only on our rental property and repayment on our residential already

What happened was our fixed rate ended and we went onto the high variable rate

OP posts:
lovewoola · 17/08/2023 09:07

rather stay with ours though and force them to not be twats and say we have to earn £150k a year to be 'allowed' to

they are not being twats it's risk analysis. only higher earners been able to access interest only has been the status quo for a while.

lovewoola · 17/08/2023 09:09

for residential

lovewoola · 17/08/2023 09:11

We want to keep that going and just pay interest only until we retire in 10 years, sell our flat and pay off our second home

you could shop around but it's unlikely you will be able to do this. Banks tighten up in these climates. A friend was trying to move to interest only with 60% equity but as they don't earn 6 figs they can't. Another friend a low earner but with massive equity (over 1m) wanted to borrow more against house but wasn't allowed.

Jmaho · 17/08/2023 09:12

If your second property is let out then you need to get it onto a proper BTL rate and then you can go interest only no problem at all regardless of income level

lovewoola · 17/08/2023 09:12

@LaurieFairyCake can you not afford the repayments on your main home?