Interest-only mortgages have come under fire in recent years, but those who still have them are facing a particularly difficult time ahead – especially those who are dealing with the prospect of retiring while still in debt
Research from over-60s property experts Homewise has found that 10% of mortgaged homeowners aged 55+ have an interest-only deal, and while the majority are confident about being able to pay it off, a worrying proportion fear they won’t be able to clear the debt when the deal runs out.
In fact, 17% of interest-only borrowers admit that they’ll be unable to clear the debt, and given how much they still have to pay off, it’ll no doubt be a worrying time. Indeed, the average amount owed by over-55s with interest-only mortgages is around £91,000, with one in seven owing more than £150,000.
Homewise is therefore urging these borrowers to be proactive and start planning ahead for when their mortgage runs out. Happily, many of them have plans in place – 34% plan to clear their interest-only mortgage with cash from savings and investments, while 10% aim to use pension cash and another 11% are banking on an inheritance to clear the debt.
But what if you don’t have those kinds of options at your disposal? That’s where things like remortgaging could come in, or even downsizing, for although leaving the family home may be a difficult course of action, it’ll be far better than having excessive debt to clear.