Please help- mortgage interest free

[Choppychop]

Hi - i am clueless with my own mortgage. When I signed it was 3 year fixed and since then it’s been open for ten years through all of the awful years of high interest rates. I am completely clueless: l my boss told me I need to remortgage as I’m currently paying interest only. How do I change this? Do I go to bank and remortgage? Do I need a deposit for this? I’ve never been taught which is strange as my parents are very savvy. Just not sure.

Does anyone get taught this stuff? Just contact the bank or better London and country mortgages to get a quote to switch to a repayment mortgage and a low fixed rate.They will locate the best deal. You then switch.

If you've lived in your home for 10 years, so the value should have risen and initially you had a deposit, then you should have equity so won't need more of a deposit.

But are you sure your mortgage is interest only? Post 2007 it would be very unusual for a homeowner to be interest only without a repayment vehicle.

Can you ask your parents for help understanding your mortgage and applying for a new deal?

You can also look on Moneysavingexpert.com for advice, talk to a broker either online or in person or search for deals on websites like Money Supermarket.

Your boss is confused I think. At the end of the 3 years you will have moved from the fixed interest rate to the standard variable rate. It will still be a repayment mortgage.

Yes as pp has said I don’t think your boss is correct, after the fixed rate ended you would have just switched to the standard variable rate which is higher interest but also a repayment plan. No mortgage provider switches someone to interest only without the person knowing.
Get some help with this, you can call your bank and ask them what mortgage you are on what your interest rate is , what the capital is etc then speak to your parents about it if they are savvy as you say. They probably think you know this stuff especially if you have a mortgage. Also start researching mortgages what the different ones mean what’s available and what could be best for you, Martin Lewis is always a good place to start. No one taught me about mortgages I learnt myself what I needed to know.

Not if it's been an interest-only mortgage all along, which it might be

You contact your lender and get quotes to change to a repayment mortgage. I am not sure why the bank hasn’t already asked you to do this. Did you ask to change to interest only (not interest free) for a temporary period after a change in circumstances then just never change back? Interest only mortgages are not encouraged for very good reasons.

Alternatively if you are on SVR just ask for a new fixed rate deal. It sounds as if either you or your boss is confused.

questions to ask your bank.

1 Are you on a repayment or interest only mortgage?
2 Are you paying standard variable rate and what is it?
3 what is remaining term on your mortgage and the balance?
4 can they give you a better rate and if so what are penalties if you repay early (if you move for example) and are there any fees/charges for the deal?

This is one of the most concerning financial posts I read recently. Massive, massive amount of money owed and no understanding.

You had paperwork from the lender whoch clearly explained what, how much and when to pay and what will happen once the fix ends. You need to find it, read it and speak to your lender about options to fix, change produxt or whatever is needed.

You need to find your original mortgage papers.

1. The mortgage will absolutely not be interest free. Interest is how banks make their money.
2. If the loan is interest only, at the end of the mortgage period (not the same as the fixed rate period) you will owe the total purchase price of the house (so if you bought for £150,000 on a 25 year mortgage, at the end of 25 years of making interest only payments, you will still owe £150,000).
3. If your boss thinks you are interest only just because you are no longer in the fixed rate period, he/she doesn’t understand how mortgages work. At the end of the fixed rate period of a normal mortgage, you will have been transferred to the lender’s standard variable rate. This is usually much higher than a fixed rate so you are throwing money away each month. Why does your boss think your mortgage is interest only?

If you are on the standard variable rate, you need to find a good rate (this can be with any lender - check money saving expert as a PP says) and apply for a remortgage. To do this, you need to know how much you owe.

If you are on an interest only mortgage, unless you have a vehicle to pay off the mortgage e.g. a pension lump sum, savings, some sort of endowment policy, you really need to remortgage to start clearing your debt. If you do have an endowment policy, check it will cover the mortgage. A lot of people have found out theirs won’t.

Register for online banking (if not already registered). Your online mortgage account will say how much you owe and the interest rate. If the amount you owe is going down each month (however little), you are not on an interest only mortgage.

No you already own the property so you won't need a deposit. You re mortgage with a lender and request capital and interest. They will value your home etc. why did you go on interest only ?

Thanks everyone! I will speak to the bank next week for advice.

I am on a variable mortgage - not interest only. Going to remortgage on advice from my parents. I’m single and was just happy to have my own place when I bought and never really questioned anything. Going to start being a little more clever about all of this from now on…

You might also find the Mortgage pages at MoneySavingExpert helpful to have a read through OP 😊

Whoever you remortgage with, register online. You can then log in and watch the amount go down each month. Always nice!

Also, I don’t know your financial situation. If you can overpay each month, you will save a fortune in interest - I think moneysaving expert has a calculator. Maybe look into that?

Edited to say: And always look to remortgage when the fixed period ends - again, this will save you money.

Variable refers to whether the interest rate is fixed or not.
You need to determine whether your mortgage is repayment or interest only. Repayment means you are paying the interest plus a small chunk of the actual amount loaned (known as the capital) as well.
If you are on an interest only, you can usually change it fairly easily, sometimes with the same lender, sometimes you can just add a monthly extra payment which will be deducted from the capital. Or you can remortgage with another mortgage provider. Just check the rates & fees and work out what’s best.
keep reading and learning about your finances!

I’m just going to chime in that we haven’t actually had high interest rates for a long time.

The average bank of england base rate since 1970 is 7.9%. Current interest rates are therefore actually still quite low.