Interest only mortgage advice needed

[secondhandsue]

To cut a very long story short, DH and I want to separate, however, we bought our first house in November and took out an interest only mortgage, value of property was £175k but we borrowed £198k so have a massive loan too,we have done some work on it but not enough to add value on as the house prices have dropped here!! what on earth can we do? He sorted it all out I hardly know anything about the detail, its on a fixed rate for 3 years, can anyone advise, it sounds really dumb, but we have paid back nearly £6k interest, I don't know what to do, even if we sell we can't pay the loan back? and I have no where to live?

Can you look at changing to a capital repayment mortgage? I.e. the more standard type. It will mean much higher repayments monthly though, but will at least be shifting the debt. You could then maybe rent out the house and you move to a much smaller (maybe rented house).

So sorry that you have got into this situation. Hopefully someone else will be along with useful ideas... It's alot of money.

If you are locked into a fixed-rate deal for 3 years it will be impossible to get out of without financial penalty.

With regard to the sale of the house, are you completely sure of its current resale value. You may be able to get more for it than you think.

Interest only loans don't repay any of the Capital so you are only keeping the mortgage and loan alive by paying the interest. The capital will remain the same.

Defniitely worth getting a valuation, for both sale and rental - one or the other might be higher than you expect, and you can either recoup the money through sale, or rent the property out either on the current interest only mortgage (not sure where you standa legally on this, but have a feeling it's ok as you lived in the house) or by changing to a repayment mortgage and facing the charges for leaving the mortgage.

You can walk away and give the keys back to the lender (as many people did in the 80's) however this will severely impact upon your credit reocrd in the future.
Generally though there will be a penalty for redeeming the mortgage within the fixed rate period and you will owe them the money left over on the mortgage after the sale of the house.
You can rent the house out in the meantime, that will be one way to wait until house values rise.
On an interest only mortgage whatever interest payments you have paid the balance will still be outstanding regardless.
Can either of you afford the mortgage on your own if you take a lodger?

sue if you want some free advice my dp has an ad on here you can email him he could also help you look at alternative mortgages