What happens if you haven't paid your mortgage off by the end of the term?

[Chicchicchicchiclana]

As per thread title.

What is the procedure if you get to the end of your mortgage term and there is still money outstanding?

What does the bank or building society do?

Are you on a fixed rate just now? Can you plan for the shortfall by increasing the term next time it’s up?

Bil experience:
A) sell and pay off
B) repossess
C) take out equity release/lifetime mortgage

They did actually seriously start down the repossession route before family realised and stepped in to help.
And no judgement here at all

If you’ve taken a mortgage repayment holiday then once it’s ended your repayments are re-calculated over the remaining term.

Was the interest only bit agreed or did you just stop making the full payments as usually there are quite a few hoops to jump through to get an interest only mortgage and you have to sign to say you will either sell your house or pay the full balance at the end of the term.

@Chicchicchicchiclana

I'm talking about a 25 year mortgage that we have sometimes paid repayment, sometimes interest only, sometimes with mortgage holiday (thanks redundancy, self employment and covid).

By current calculations there will be a shortfall at the end of term. I'm actually only interested in the building society procedure when we get to, say, the last 6 months of term. Not comments on how come we didn't do repayment from day 1. We have never extended this mortgage for other finance btw before anyone jumps in.

Normally, they will re-amortise the principle balance and interest over the remaining term and update your monthly payment. So since you ate in shortfall, they would increase your monthly payments a bit so you are still at 0 at the end of the original 25 yrs.

But you always have choice to remortgage with them or another bank (usually for a fee) and in that case, they start over. Your equity is the deposit, you get a new interest rate, the new mortgage can be for 15, 20, 25, 30 yrs etc and you get a new monthly payment of principle and interest.

How long have you got to go?

You'll need to repay the balance. You can do that several ways but probably the most obvious, straightforward and least challenging one is for you to remortgage NOW for the full balance. Leaving it until the last minute will make it more expensive and harder.

Obviously whether you can will depend on your current circumstances.

I would expect the bank to be in touch to discuss options.

We have an interest only. We're paying extra when we can and have a lot of equity so when we come to sell ( well before the end of the term) we'll be able to pay it all off and buy something a lot cheaper elsewhere. This has always been our plan.

I have no real clue op but I am thinking that if you have, say, 6 months still to pay off at the end of term, they would just allow you another 6 months? You can't be the only person who could find themselves in this position given the need for repayment holidays necessary through unsettled work, covid ext.

The other alternative, which I do know about through friends, is to add a bit onto the morgage monthly to gradually make up the deficit
I

@Bleughbleughbleugh12

Probably kill you 🤷‍♀️

🤣🤣🤣 literally the contract🤣

www.fca.org.uk/publication/documents/interest-only-mortgages-act-now.pdf
FCA advice

Why don't you contact the Building Society and ask them?. Surely that's the way to get a definite answer.

Your lender will have an End of Term team who will be in touch with you as the term reduces. They will be able to discuss any possible options with you. However the closer you come to the end of term and older you become the options can reduce and not be great for your future plans. I would suggest you speak to your provider about extending your mortgage term and placing the full mortgage on repayment to make it manageable and have the assurance at the end of the new term you will owe nothing.

@Galliano great article, really answers all the questions.

I had an endowment mortgage and was about £5,000 short. I got in touch with bank a couple of months before it was due to extend and they agreed I could extend it for another few years. They said I wouldnt of been able to do that if I had left it till the mortgage had ended.

@Maskedcrusader

Why don't you contact the Building Society and ask them?. Surely that's the way to get a definite answer.

Because I wanted to ask Mumsnet.

Basically you will owe the money and they will want you to repay it. If you do nothing they will just expect the whole lot at once. However there are a numbr of things you could do:

Save extra per month elsewhere in preparation for it

• however you are unlikely to get a rate that outdoes your mortgage for saving

Overpay now - talk to the bank as to how much you need to overpay to repay - if you front load it ie pay more now than later it will benefit you financially as its paying down the capital outstanding earlier therefore you are not being charged interest on that amount you overpay earlier later on in the term

If you can't overpay just now you should plan to in future - pay in lump sums is also good. Perhaps you could start a sideline with the aim of paying it into the mortgage to over pay if finances don't allow.

Trouble is once you reach a certain age they won't remortgage and you end up with more of a loan which is more expensive and over a shorter term.

Another option is once any kids leave home is to downsize the house reducing funds needed for mortgage elements

@Whaddayathink

The bank will repossess. They send letters years beforehand warning you to check any endorsements.

How many years beforehand, does anyone know?

All being equal (ie if house prices don't change and we can carrying on paying our current interest only + monthly overpayment) we will owe about 8% of the current value of the house in 8 years time. We do want to sell and downsize sometime before the mortgage expires, but I was interested in the procedure if we don't and how long do we get to sell if we leave it till the last minute.

Actually anothr option is to take out a loan to repay - say if its 10k and then rathr than paying mort you pay loan for a few years

Can you not just remortgage now and do say a 9 year term instead? Surely you don't have to stick with the same mortgage for the next 8 years, unless you're on a 10 year fix. We're in a 27 year term at the moment, don't see us having the same mortgage for 27 years though, we'll probably change when the fix is up in 3 years

Sell
Use savings
Remortgage
Equity release

Sorry, to add you will get written notice from your lender in advance. They won't swoop in and kick you out...

If you already know you're going to be short it's worth talking to the lender to explore the options in advance. If you leave it to the last minute the lender has you over a barrel and you'll have very little option but to accept what they want to do. If you decide to take charge of the situation now you won't have to passively accept whatever the "procedure" is.

Of course, it's entirely within your right to leave it the last minute. It will make for a great AIBU thread.

In terms of the how many years beforehand it’s not mandated so different lenders will have different policies on this e.g. this Bradford and Bingley policy here suggests several contacts but all in the last 12 months of the term. You should be able to find your lender’s policy by searching. It’s in the lender’s interest too that you have a repayment method in place and they can’t withdraw the current contract unless you breach it so you have nothing to lose by contacting them.

All being equal we will owe about 8% of the current value of the house in 8 years time

You aren't going to get repossessed for that much. You are aware of the issue and will get it sorted easily. Just remortgage when your current deal ends and extend the term a bit if the repayments offered are too high.

www.moneysavingexpert.com/remortgaging/

With that much equity you should have no difficulty getting a good deal, even if your credit score is imperfect.

All being equal (ie if house prices don't change and we can carrying on paying our current interest only + monthly overpayment) we will owe about 8% of the current value of the house in 8 years time. We do want to sell and downsize sometime before the mortgage expires, but I was interested in the procedure if we don't and how long do we get to sell if we leave it till the last minute.

I think it's pretty clear that the consensus is that your mortgage company will begin chasing in earnest when it's under 5 years to repayment (best chance of refinancing incl. extended mortgage) and that if you decide not to tackle it in advance it could properly bite you in the bum.

But if you intend to downsize it's basically a moot point.

OTOH, if you 'overpay' now you will get a bigger share of the equity from any subsequent sale.

I think it's not a decision to leave to chance/Fate/happenstance.
Either plan to repay in X years or plan to sell in X years.

Leaving it hanging is not great.